Attached files
| file | filename |
|---|---|
| 8-K - Otter Tail Ag Enterprises, LLC | v164400_8k.htm |
| EX-99.1 - Otter Tail Ag Enterprises, LLC | v164400_ex99-1.htm |
EXHIBIT 99.2
 |
24096
– 170th
Avenue
Fergus
Falls, MN 56537
Phone:
218 998-4301
Fax:
218 998-4302
ahicks@otaellc.com
www.ottertailethanol.com
|
NOT FOR
RELEASE BEFORE 12:01 A.M. ON
October
31, 2009
Fergus
Falls, Minnesota
For more
information, contact Anthony J. Hicks 218 998-4301
Fergus
Falls Ethanol Achieves Agreement with Lenders
Files for
Negotiated Chapter 11 Protection to Reorganize
Otter
Tail Ag Enterprises, LLC, (OTAE) has achieved an agreement with its senior
lenders and filed for court protection to implement a strategy intended to
create a viable company that can compete in current markets.
“We
believe that by filing for the protection afforded us under Chapter 11 of the
U.S. Bankruptcy Code, we will be able to move forward with our senior lenders
and members to restructure our debt and raise the necessary capital to move
forward in today’s economy,” said Anthony Hicks, Otter Tail Ag’s Chief Executive
Officer.
The
pre-arranged bankruptcy filing was done with the approval of the company’s
senior lenders, AgStar Financial Services, which represents ten banks, and MMCDC
New Markets Fund II. This will allow the company an opportunity to restructure
its indebtedness and negotiate contracts to reflect present day market
values.
“Negotiating
a pre-filing arrangement with our senior creditors allows us the best
opportunity to finalize our restructuring plan, which we will seek to have
approved by the courts,” Hicks said.
OTAE was
hit by what some in the ethanol industry have called “the imperfect storm.” The
rising price of corn, the falling price of gasoline and the national economic
crisis created a very difficult situation for many ethanol producers across the
country, especially the newer plants that were built in the last few years, such
as the Fergus Falls facility, which opened in 2008.
According
to industry information, by February 2009, about 9 percent of all the ethanol
plants in the U.S. had filed for bankruptcy and some analysts believed the
numbers could reach as high as 20 percent. However few have reportedly done this
with a pre-negotiated arrangement with their lenders.
VeraSun,
one of the nation’s largest ethanol producers with 16 plants, filed Chapter 11
last fall without terms from its senior lenders. VeraSun’s failure to achieve a
lender agreement led to a forced sale of the company’s assets. The majority of
VeraSun’s ethanol plants were purchased by Valero, one of the U.S.’ largest
petroleum refiners. The remaining plants were purchased by other groups and
resold to a variety of buyers. VeraSun’s ethanol production facility in
Hankinson, North Dakota, sat idle for a year and was sold to Murphy Oil
Corporation, based in El Dorado, Ark. The Hankinson facility resumed operations
in mid October.
Page 1 of
2
“We have
been working to avoid the kind of fire sale liquidation of plants that has been
happening around the country, where big outside companies come in and buy the
assets for pennies on the dollar” Hicks said. “Our goal has been to find a way
for the plant to continue operating, to keep an opportunity for local ownership.
This is in the best long-term interest of our members and the
community.”
The
Fergus Falls ethanol plant is one of the single largest projects in the
community. During its original equity offering and subsequent financing two
years ago, Otter Tail Ag Enterprises enjoyed, in the words of Hicks, “tremendous
local and regional support from the community of Fergus Falls, Fergus Falls
Township, Otter Tail County, the State of Minnesota and many surrounding
communities.”
OTAE
experienced significant losses for the fiscal year 2009, and its approximate $81
million of long-term debt is greater than the company’s ability to repay under
the present terms and conditions, according to Hicks.
“The root
cause of this has been the price of both corn and ethanol,” Hicks said. “The
company held long corn positions last fall and short ethanol. The markets
dropped dramatically across the board, and OTAE was not immune.”
In
meeting with its members in February of this year, the OTAE board and management
were told to reduce the company’s debt. The bankruptcy filing is part of the
strategy developed to accomplish that goal.
Under
protection of bankruptcy, the board and management will work with the lenders to
negotiate new contracts and debt agreements and raise approximately $12 million
in new equity.
The
ethanol industry is presently experiencing a rally. Lower corn prices of late
summer and higher prices at the pump for gasoline have enabled many ethanol
producers to see some black ink for a welcomed change, according to industry
analysts.
“Ethanol
has had wonderful times but has gone through a dry spot the last nine months,
but it has a rosy future,” said Bruce Dale of Michigan State University, a much
sought after expert on bio-energy research. “Ethanol is not going away; in fact
I think it will continue to grow.”
According
to Hicks, operations at OTAE will be buiness as usual. “We continue to purchase
corn, make ethanol and sell distillers grain.”
-end-
Except
for historical information contained herein, the statements in this information
release are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve known and unknown risks and uncertainties which may cause the Company’s
actual results in future periods to differ materially from forecasted results.
Those risks include our expectations regarding future costs and revenues and
consumer demand for ethanol. These and other risks are more fully described in
the Company’s filings with the Securities and Exchange Commission. The
information contained in this release is accurate only as of the date issued.
Investors should not assume that the statements made in these documents remain
operative at a later time. Otter Tail Ag Enterprises, LLC undertakes no
obligation to update any information contained in this release.