Panda Ethanol’s Hereford, Texas subsidiary files voluntary Chapter 11
By Panda Ethanol
By Panda Ethanol
January 29, 2009, Dallas, TX – Panda Ethanol Inc. recently announced
that its Hereford Biofuels subsidiary has filed a voluntary petition
for relief under Chapter 11.
The company intends to sell its major asset, the Hereford ethanol refinery, pursuant to a sale process approved by the bankruptcy court. The bankruptcy filing does not include parent company Panda Ethanol. The Chapter 11 filing was precipitated by the refusal of one of the project’s leading banks to fund its loans.
According to Panda Ethanol, the company was notified December 31, 2008 that one of its major lenders would not fund its share of further borrowing requests for the project. After repeated conversations with the syndicate and an unsuccessful attempt to secure debtor-in-possession financing, the Hereford subsidiary’s management concluded that the only prudent option available was to put the facility up for sale.
“Over the past many months, we have worked diligently to successfully overcome a number of challenges,” said Darol Lindloff, chief executive officer of Panda Ethanol. “But, when faced with insufficient funding to complete and operate the project, we were effectively presented with only one choice – to seek the protection of the courts and put the Hereford facility up for sale.”
The Hereford subsidiary is currently in negotiations with a potential buyer although other companies will have an opportunity to submit bids for the facility under a court-supervised process. The company expects a sale to close within 60 to 90 days.
In the interim, the Hereford subsidiary intends to seek approval from the bankruptcy court to draw upon and use existing cash collateral to fund ongoing operations.