Business Context and Reporting Period
Company: Green Plains Renewable Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 6, 2009 (Earliest event reported: July 2, 2009)
Context: The Company, through its wholly-owned subsidiary Green Plains Holdings LLC, completed the acquisition of two ethanol production facilities in Nebraska (Ord and Central City) from a lender group led by AgStar Financial Services, PCA. The transaction was funded via new credit agreements and marks the resumption of operations for plants that had been idle since the VeraSun Energy bankruptcy in October 2008.
Key Financial Metrics and Transaction Details
- Total Purchase Price: $123.5 million ($38.0 million for Ord facility; $85.5 million for Central City facility).
- Financing Structure (Credit Agreements):
- Ord Facility: $25.0 million amortizing term loan, $13.0 million revolving term loan, $5.0 million revolving line of credit.
- Central City Facility: $55.0 million amortizing term loan, $30.5 million revolving term loan, $11.0 million revolving line of credit.
- Interest Rates:
- Amortizing Term Loans: 3.0% + max(30-day LIBOR, 2.0%) or fixed 5.5% for two years.
- Revolving Term Loans: 1.5% + max(30-day LIBOR, 2.0%) until Dec 31, 2010, then same as amortizing loans.
- Revolving Line of Credit: 4.0% + max(30-day LIBOR, 2.0%).
- Maturities: Term loans mature July 2, 2016; Revolving line of credit matures July 2, 2011.
- Capital Expenditures: Estimated up to $2.3 million required to update technology and restart operations (initial $2.0 million to be paid by Sellers).
- Production Capacity: Central City (100 million gallons/year); Ord (50 million gallons/year).
Material Changes and Operational Status
The primary material change is the addition of two significant ethanol production assets to the Company's portfolio. Both facilities were non-operational following the VeraSun bankruptcy. The Company has secured financing to acquire and restart these assets. The plants utilize corn feedstock in a dry mill process and are located adjacent to Union Pacific rail lines for distribution. No legacy corn purchase contracts were assumed.
Outlook, Risks, and Covenants
- Operational Outlook: Plants are expected to be operational by the end of July 2009. The Company has hired 77 of the 87 required positions, primarily former employees.
- Regulatory Status: Necessary environmental, health, and safety permits (including alcohol fuel producer permits) are being modified or applied for and must be in place prior to start-up.
- Financial Covenants: Credit agreements require a minimum working capital of $10 million at the end of each fiscal quarter and adherence to fixed charge coverage ratios.
- Risks: Risks include failure to secure permits, inability to meet financial covenants, and market conditions affecting ethanol sales. The loans are secured by all real and personal property of the plants with cross-collateralization.
- Events of Default: Include failure to make payments, breach of covenants, bankruptcy, or judgments exceeding $250,000 (Ord) or $500,000 (Central City).
Key Facts for Investor Verification
- Verify the status of environmental and alcohol fuel producer permits required for restart.
- Confirm the timeline for the $2.3 million capital expenditure and the $2.0 million contribution from Sellers.
- Monitor the Company's ability to maintain the $10 million minimum working capital covenant.
- Assess the impact of the new debt load ($123.5 million purchase price funded largely by debt) on the Company's overall leverage and liquidity.
- Review the full text of the Credit Agreements and Purchase Agreements filed as exhibits to the Form 10-Q for the quarter ended June 30, 2009.