VeraSun Deals Get Court's Stamp of Approval

Deals struck this week gets approval from the presiding bankruptcy judge.

Published on: Mar 19, 2009

The VeraSun Corp. asset sale reported Wednesday has been approved by the U.S. Bankruptcy Court. Essentially the court has approved the sale of essentially all assets of VeraSun to Valero Renewable Fuels and a group of secured lenders. The sales will close over the next two to six weeks.

Valero is purchasing the VSE Group including production facilities in Aurora, S.D.; Charles City, Fort Dodge and Hartley, Iowa, and Welcome, Minn., and a development site in Reynolds, Ind. Valero Renewable Fuels is a subsidiary of Valero Energy Corporation, North America’s largest petroleum refiner and marketer based in San Antonio, Texas. Valero has agreed to purchase the VSE Group facilities for a base purchase price of $350 million, $72 million for the US Bio Energy facility in Albert City, Iowa and $55 million for the ASA facility in Albion, Neb., plus working capital and other certain adjustments.

The secured lenders for the remaining facilities submitted successful credit bids. Dougherty Funding, LLC submitted a credit bid of $93 million for the Marion, S.D. production facility. A group of lenders led by AgStar Financial Services submitted a credit bid of $324 million for the remaining “US BioEnergy Group”, which includes ethanol production facilities in Central City and Ord, Neb.; Dyersville, Iowa; Hankinson, N.D.; Janesville, Minn., and Woodbury, Mich. A group of lenders led by West LB AG submitted a credit bid of $99 million for the remaining “ASA Group” facilities, consisting of production facilities in Bloomingburg, Ohio and Linden, Ind.

A Dow Jones report notes that Archer Daniels Midland was also in the bidding for the facilities. Valero's opening bid was reported at $280 million, but ended at $536.5 million - which is reported to be $33 million more than ADM wanted to spend.

The combined sale of VeraSun, U.S. Bioenergy and ASA - 11 deals in all - will produce enough cash to cover the bankrupt firm's secured debts and potentially offer something for unsecured creditors too. Both ADM and Valero had offered up whole-company bids for all assets on the block, but the Valero bid was on a plant-by-plant basis. Anti-trust concerns were raised about an ADM purchase - ADM is the largest single ethanol producer in the country.

The credit-bid offers essentially take the form of canceling debt rather than bringing new cash to the table. Those bidders are already making deals for the assets acquired. For example, wire reports show that the Dougherty Funding credi bid of $96 million for one plant - a South Dakota facility - may go to NewGen LLC, which has apparently entered the picture.