VeraSun Energy Corporation has yet to make an official comment relating to reports that it is filing for Chapter 11, but its stock has taken a significant plunge.
The financially beleaguered ethanol manufacturer, which has 17 ethanol plants throughout the Midwest, including one in Fort Dodge, announced Sept. 18 that it was studying ''strategic alternatives'' with Morgan Stanley, which could mean anything from a buyout to a partial sale of assets. Industry talk has stated that the company, which trades as VSE: NYSE, found itself on the wrong side of the corn futures market.
The company, based in Brookings, S.D., has issued no releases or official statements since Sept. 18.
Reports started moving across financial news wires Tuesday when Debtwire, which covers distressed companies from early stages of financial distress to Chapter 11 filings, stated that two unnamed sources reported that VeraSun, one of the largest manufacturers of ethanol in the nation, was filing for Chapter 11.
On Wednesday, a report from Seeking Alpha, an online stock market analysis publication, said VeraSun closed a plant in Linden, Ind. Later the same day, Reuters, an international news service, reported that the Indiana facility would be back in full operation ''in a few days.'' It had been closed, the spokesman who spoke with Reuters said, due to ''poor economics for distilling the alternative motor fuel.''
Multiple calls by The Messenger to reach a spokesman for VeraSun were not returned by press time Thursday.
VeraSun started operations in new Iowa plants on Sept. 5 in Dyersville and Aug. 14 in Hartley. It also has plants in Albert City and Charles City.
In December 2007, it purchased the plants of U.S. BioEnergy, bringing its total refining capacity to 1.6 billion gallons per year.
In 2007, the Messenger reported VeraSun had received a $1 million tax incentive from the state in order to develop the technology to extract corn oil from the ethanol byproduct, distillers dried grain. That oil was expected to be sold to a biodiesel refinery.
The plant said the new process would create 14 new jobs, paying an average of $16.60 per hour at the plant. It would also represent a $30 million investment in processing machinery. The company also received $200,000 from the state's Value Added Agricultural Products and Processes Financial Assistance Program to build a 1,300-ton-a-day corn oil extraction facility in Fort Dodge. Half of the funds were to be repaid within five years on a low-interest loan. The other half would be forgiven if VeraSun created the 14 jobs.
To date, that facility has not been built.
VeraSun posted total revenue of $843.8 million in 2007, a 52 percent increase over the previous year. Net income for the year was $26.6 million.
According to the Associated Press Wednesday, Joseph Gomes, an Oppenheimer Research analyst, said a recent VeraSun management client note claimed the company had not made the (Chapter 11) decision as yet.
The company's third-quarter reports posted losses of between $63 million to $103 million. Prior to consulting Morgan Stanley, VeraSun issued a statement Sept. 16 saying it was attempting to raise $20 million by selling common stock. VeraSun then rescinded the offer two days later, stating that several companies had expressed a ''strategic interest.''
After news of the possible Chapter 11 filing was released Tuesday, VeraSun's stocks fell from more than $1 to 73 cents and to 49 cents on Wednesday. According to msn.com, the stock saw a modest 8-cent climb to $.57 at the end of trading Thursday. Last December, the stock was trading at $17.
Reuters had reported that VeraSun put itself up for sale in September after taking a beating for locking in costly contracts for corn, the main U.S. product for U.S. ethanol. Corn prices have fallen by about half since peaking over the summer.
Market analysts have stated online they doubt VeraSun is at the point of filing bankruptcy after recently rescinding its public stock offering, which would have raised millions of dollars in operating cash.
The company's Web site states that VeraSun focuses primarily on the production and sale of ethanol and its co-products, with a combined ethanol production capacity of 560 million gallons per year. As of March 4, its ethanol production capacity represented approximately 7 percent of the total ethanol production capacity in the United States.
Contact Larry Kershner at editor@messengernews.net.