creditors call for ethanol producer Abengoa to pay them first

Source: By Russell Hubbard, Omaha World Herald • Posted: Tuesday, March 29, 2016

The Nebraska grain sellers left out in the cold after selling corn to distressed ethanol producer Abengoa have said in court papers that they are still concerned about how proceeds related to the shuttered Ravenna, Nebraska, plant will be used.

“Our main concern is that the proceeds of Nebraska assets are used for the benefit of Nebraska creditors,” said James Powers of Omaha’s McGrath North law firm, who represents Nebraska grain sellers who are owed money after shipping to Abengoa’s Ravenna plant.

 The heart of the current dispute is a $41 million bankruptcy loan secured by Abengoa and awaiting final court approval.

That money, the Nebraska grain sellers say in court filings, should go to benefit Nebraska creditors, not the far-flung Abengoa energy and engineering operations.

The Ravenna plant is a small unit of Spain-based Abengoa, the parent company that began defaulting on $10 billion in debt and contemplating the largest bankruptcy in that nation’s history.

Bankruptcy was averted after 75 percent of creditors in recent days agreed to wait things out while the company restructures its debts. The Spanish parent company said Monday that it has filed with the proper court in Spain for judicial approval of the standstill agreement with creditors.

In February it was the Nebraska grain sellers who fired the first shot in the local Abengoa bankruptcy saga, filing an involuntary petition against the Ravenna plant after not being paid $4 million for their corn, which was destined to be refined into ethanol.

This month, the case was converted to a voluntary reorganization and combined in Missouri with other bankrupt affiliates of Abengoa, which operates plants around the globe.

Grain sellers Gavilon, Farmers Cooperative of Ravenna, the Andersons Inc., Farmers Cooperative of Dorchester and Central Valley Ag Cooperative said in court filings recently that U.S. Bankruptcy Court in St. Louis should withhold final approval of the emergency loan. (Most material financial transactions in bankruptcy require a judge’s approval).

The filing notes that the loan is expensive, carrying a 14 percent interest rate, vaulting to 21 percent in the event of default.

“Cash flow from the Ravenna facility, if and when it is reactivated, will not be segregated so it can be applied for the benefit of the existing unsecured creditors,” reads a recently filed document by the Nebraska creditors. Instead, it says, the money “may be used … to fund other expenses” of other Abengoa affiliates.

In other words, the proceeds from the plant — if it gets restarted using loan proceeds — could go into the coffers of organizations owed money by Abengoa that had nothing to do with the Ravenna plant.

While the scope of Abengoa’s trouble is global, there is plenty at stake for Nebraska creditors: All told, 11 Nebraska companies and governments in Nebraska are owed almost $20 million by Abengoa related to Nebraska operations.

Omaha-based Gavilon is out $2.3 million. The Andersons is out $1.4 million in Nebraska. Farmers Cooperative of Ravenna is due $362,000. BNSF Railway, owned by Omaha’s Berkshire Hathaway, is due $2.5 million for transporting grain for Abengoa, according to court filings.

Also owed money are Nebraska taxing authorities York County (owed $270,448) and Buffalo County ($909,000).

The filing also notes that ethanol prices are depressed and that no clear plan about how the plant will profitably operate has been shared with creditors. Ethanol prices have fallen 40 percent in the past five years.

“The debtor has put forward no evidence that the loan is needed or provides any benefit,” says the filing by the Nebraska creditors.

“The possibility that operations at the Ravenna facility may resume absent some evidence of profitability is not a basis for approving the loan, especially given the historically low ethanol prices in the market currently,” the filing says.

The whole Ravenna plant, meanwhile, is worth about $63 million, according to the Nebraska creditors.

Berkshire Hathaway Inc. owns the Omaha World-Herald.