Pacific Ethanol (Nasdaq: PEIX): +15%; Reorganizing & Cutting Debt
Shares of Pacific Ethanol (Nasdaq: PEIX) were up 15% at $0.56 on very heavy volume of 3.8 million shares. No recent news to speak of, but there must be something going on so I put in a call to the Company and will be back later with more. Pacific Ethanol announced recently plans to reorganize; purchase other subsidiaries; and eliminate about $290 million in debt.
In the press release, PEIX announced the confirmation of its plan of reorganization (“Confirmed Plan”) for its wholly-owned subsidiary, Pacific Ethanol Holding Co. LLC (“PEH”), together with PEH’s four wholly-owned ethanol production facility subsidiaries (“Plant Subsidiaries”). The Confirmed Plan, which was unanimously approved by the secured lenders, is expected to be effective by the end of June 2010.
Upon the effective date, the ownership of PEH and the Plant Subsidiaries will be transferred to a newly formed holding company (“New PEH”). As part of the Confirmed Plan, the Company has an option to purchase up to 25% of the total ownership interests in New PEH for up to $30 million in cash, which is exercisable within 90 days from the effective date.
The Confirmed Plan will result in the elimination of approximately $290 million of the Company’s debt and other liabilities. New PEH will have term debt of $50 million with a working capital line of credit of up to $15 million, which may be increased to up to $35 million, under the terms of the credit facility.
Neil Koehler, the Company’s CEO and President said, “Achieving a confirmed plan of reorganization is a significant milestone in our restructuring efforts. New liquidity and low debt levels provided by the plan support our efforts to optimize operations at the two facilities currently running, and as market conditions permit, resume operations at the two idled facilities. Holding an option to purchase an equity interest in the facilities at a significant discount to replacement costs is a valuable opportunity for Pacific Ethanol. With the federal Renewable Fuel Standard requiring increasing levels of ethanol to be blended into gasoline and the implementation of California’s Low Carbon Fuel Standard beginning in 2011, we are optimistic about the future of the ethanol industry and the success of our company.”
Pacific Ethanol produces and sells ethanol and its co-products in the western United States, primarily in California, Nevada, Arizona, Oregon, Colorado, Idaho, and Washington. It also provides transportation, storage, and delivery of ethanol through third-party service providers. The companys co-products comprise wet distillers grains. It sells ethanol to gasoline refining and distribution companies, and wet distillers grains to dairy operators and animal feed distributors.
Stay tuned for more up-to-date information once I hear back from the Company.
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