By KEVIN WALKER
Michigan Correspondent

SIOUX FALLS, S.D. — VeraSun Energy, a major producer and marketer of ethanol, entered into Chapter 11 bankruptcy late last month and just last week announced it could not pay vendors for goods delivered before a certain date.

In a generic letter available on the company’s website, the company states that depending on when goods were delivered or services rendered, some vendors might not get paid.

“Unfortunately, we are unable under the U.S. Bankruptcy Code to pay for services provided before Oct. 31, 2008, or for goods that were delivered to us before Oct. 11, 2008,” the letter states. “If you have not been paid for goods or services provided before these dates, you will be provided in the next few months with a claim form to be completed and filed with the Court.

“Any distribution on the claim will be pursuant to a plan of reorganization … We sincerely regret any hardship this may cause.”
The website also provides more information about the reorganization, including how creditors’ claims will be handled under the bankruptcy provisions.

A gathering of company representatives and creditors, called a 341 meeting, usually occurs 30-45 days after Chapter 11 bankruptcy is filed. A notice of the meeting, along with a notice of the commencement of the case, will be mailed to all creditors within the first few weeks after the filing.

Chapter 11 bankruptcy is a reorganization plan, not a liquidation of the company’s assets. The company is making it clear it plans to stay in business. The bankruptcy announcement was made on Oct. 31 and other announcements have been made since. This involves the company as well as 24 of its subsidiaries.

The announcement states, among other things, that “the company suffered significant losses in the third quarter of 2008 from a dramatic spike in its corn costs, reflecting in part costs attributable to its corn procurement and hedging arrangements and historically unfavorable margins.”

The company filed for Chapter 11 to “facilitate access to additional liquidity … to take better advantage of VeraSun’s position as one of the nation’s largest producers of ethanol.”

On Nov. 3, the company announced it had won court approval to pay outstanding employee checks, suppliers “in the ordinary course for post-petition goods and services” and suppliers who delivered goods on or after Oct. 11, up to $20 million.

Also last week, on Nov. 4, the company announced it was delaying “indefinitely” the startup of its Janesville, Minn., ethanol plant. Construction is nearly complete; however, according to the announcement, the “secured lender” hasn’t provided the necessary funding to finish construction of the plant and conduct startup activities. The company is looking for funding from other sources.
“Our plants that were in operation as of the filing date have not been affected. They continue to operate,” said Mike Lockrem, a spokesman for the company.

The company has been delisted from the New York Stock Exchange as of Nov. 3.

VeraSun Energy has 16 production facilities in eight states, including the Janesville plant.

For more information on the reorganization, visit www.kccllc.net/verasun