Southwest Georgia Ethanol LLC, a unit of First United Ethanol LLC, filed a restructuring plan turning the company over to secured lenders in exchange for debt.

The energy producer would give senior secured lenders, owed about $107.6 million, new preferred equity and new class B common equity, according to the disclosure statement filed Aug. 26.

Southwest Georgia Ethanol is projected to have an enterprise value of at least $103 million after reorganizing, giving lenders an estimated recovery of 97.5 cents on the dollar, according to court documents.

Bondholders who are owed about $8.7 million would share the proceeds of a litigation trust initially funded with $500,000 with Fagen Inc., owed about $4.3 million, and unsecured creditors owed about $2.1 million, court filings show. They are projected to recoup 3 cents on the dollar. Granite Falls, Minnesota-based Fagen was hired to design and construct the company’s plant.

First United would get new class A common equity, if the plan is accepted by the bondholders, Fagen and unsecured creditors. It is “very unlikely” that First United would “recognize any value from its equity interest,” the company said in the disclosure statement.

The company was forced to seek bankruptcy because of rising corn prices coupled with slumping prices received for ethanol, Chief Financial Officer Lawrence Kamp said in court papers. “Ethanol and corn prices have been highly volatile in recent years.”

The company, based in Pelham, Georgia, listed about $162.3 million in assets and about $134.8 million in debt as of Dec. 31 in Chapter 11 documents filed in U.S. Bankruptcy Court in Albany, Georgia.

Southwest Georgia Ethanol owns and operates an ethanol facility producing about 100 million gallons a year on 267 acres in Mitchell County, Georgia, according to court documents. The company processes about 36 million bushels of corn a year.

source: bloomberg


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