VeraSun Energy Corporation was, at one time, the largest producer of renewable fuels in the world. Following its successful IPO in 2008, VeraSun acquired three ethanol production facilities from ASAlliances Biofuels, only to merge with another competitor, U.S. BioEnergy Corp., soon thereafter. At its peak, VeraSun operated 16 ethanol production facilities with aggregate projected production rates of ~1.64 billion gallons and more than 5 million tons of distiller’s grains.
Less than one year after the merger, commodity prices continues to break through record highs with corn peaking at $7.54/bushel in late June 2008. In order to protect against further increases in corn prices, VeraSun entered into multiple agreements that secured future quantities and prices of corn with suppliers at below then-prevailing market rates. Unfortunately, shortly after these agreements were made, the commodity markets fell precipitously, with the price of corn dropping a staggering ~60% from June to December 2008. As a result, VeraSun was forced to pay a significant premium above market prices and incurred tremendous losses on operations. In short order, VeraSun saw its line of credit disappear and its ability to tap the broader financing markets was eliminated. Consequently, VeraSun filed for Chapter 11 bankruptcy protection in October 2008.
As an expert financial advisor with deep experience in the energy industry, Carl Marks Advisors was engaged by the senior secured lenders to the U.S. BioEnergy assets, which represented 7 of the 16 ethanol production facilities, to advise and assess the operational and financial strategic alternatives available to the lender group.