November 7, 2008
Bankrupt VeraSun fails to pay October corn purchase
VeraSun Energy Corp. (VSUNQ) told its suppliers it will continue operating under the supervision of the US Bankruptcy Court, but it is unable to pay for corn delivered to its ethanol plants before October 11.
"Unfortunately, we are unable under the US Bankruptcy code to pay for corn that was delivered to us before Oct. 11, 2008," Barry Schaps, senior vice president of sales and logistics for the Sioux Falls, S.D., company said in a letter to its customers dated Tuesday. Corn sellers will need to petition the court for payment.
"We sincerely regret any hardship this may cause," Schaps said.
VeraSun, among the nation's top three ethanol producers, filed for bankruptcy protection late Friday, a move that has shaken the ethanol industry. The company was hit by record high corn prices that crimped ethanol margins and then by preset corn contracts that were bought before the corn market plunged as commodity markets tumbled.
The company said that corn and products delivered after the October 31 bankruptcy filing date will be paid for.
The letter doesn't account for corn deliveries made from Oct. 11 to the filing date of Oct. 31.
Verasun has received commitments for up to US$215 million in debtor-in-possession financing. It is also in negotiations with other lenders and expects to receive aggregate DIP financing commitments totalling US$250 million.