GPRE

Business Context and Reporting Period

Company: Green Plains Renewable Energy, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: March 23, 2007 (Earliest event reported: March 20, 2007)
Context: The Company entered into definitive loan agreements to partially finance the construction of its second ethanol plant near Superior, Iowa, and to provide working capital.

Key Financial Metrics and Debt Structure

Debt Facility: Total commitment of $50,000,000 (reduced from an initial $51,600,000 commitment).
Structure:

• Amortizing Term Loan: $40,000,000. Principal payments commence July 20, 2008. Final maturity no later than July 20, 2015.
• Revolving Term Facility: $10,000,000. Available for advances throughout the commitment life. Final maturity no later than July 1, 2017.

Interest Rates: Agent Base Rate (prime) +/- 10 to 25 basis points OR LIBOR (1, 3, or 6 month) + 280 to 335 basis points, subject to performance metrics.
Fees Incurred:

• Loan origination fees: $422,000 total ($237,000 paid at closing).
• Equity investment in lenders: $2,000.
• Other debt issuance fees: $73,410 total ($3,500 paid at closing).
• Annual administrative fee: $35,000 (commencing Nov 1, 2007).
• Unused commitment fee: 0.5% on the revolving facility (commences upon drawing).

Drawdown Status: No funds have been drawn as of the filing date.

Material Changes and Covenants

Repayment Terms: The term loan requires special payments equal to 75% of available free cash flow from operations for fiscal years 2007 through 2010, capped at an aggregate of $10,000,000.
Financial Covenants Required:

• Working Capital: Minimum $4,500,000 by Dec 31, 2007; increasing to $5,000,000 for fiscal year 2008.
• Net Worth: Minimum $45,100,000; increasing to $48,600,000 for fiscal year 2008.
• Debt Service Coverage Ratio: Minimum 1.25 to 1.0 for fiscal year 2008 and thereafter.

Dividend Restrictions: Distributions to shareholders are limited to 40% of net profit, subject to covenant compliance. Additional distributions are permitted only if free cash flow payments are made and covenants remain satisfied on a pro forma basis.
Security: Lenders hold a first-position lien on all personal property and real estate of the Company and its subsidiary, Superior Ethanol, LLC, including assignment of construction contracts.

Outlook, Risks, and Unusual Items

Construction Contract Amendment: To satisfy lender requirements, the Company amended its design-build agreement with Agra Industries, Inc. Key changes include assigning the construction agreement to the Company, requiring Delta T Corporation to provide a performance warranty, increasing errors and omissions insurance, and bonding subcontractor work.
Risks:

• Advances are subject to specified lending conditions and third-party engineer verification of construction progress.
• No assurance that the Company will remain in compliance with financial covenants.
• Special free cash flow payments could impact liquidity if operations do not generate sufficient surplus.

Management Commentary: The filing indicates the loan proceeds are intended to partially finance the Superior Plant construction and provide working capital. The credit line becomes available after required equity is utilized for construction.

Investor Verification Checklist

• Verify the Company's current working capital and net worth against the $4.5M and $45.1M covenant thresholds.
• Confirm the status of the Superior Plant construction timeline to ensure loan drawdown conditions can be met.
• Review the impact of the 75% free cash flow sweep on future dividend capacity and liquidity.
• Assess the implications of the amended construction contract and the shift of performance warranty to Delta T Corporation.
• Monitor the Company's ability to maintain a Debt Service Coverage Ratio of 1.25x once operations commence.