GO Ethanol faces shutdown next week: Bank, customer uncommitted to reorganization

TOLEDO, Oct 31, 2008 (The Lima News - McClatchy-Tribune Information Services via COMTEX) -- GOHO | Quote | Chart | News | PowerRating -- The future of Greater Ohio Ethanol is in the hands of the banks and British Petroleum and as of Thursday, neither seemed willing to step up to help, a situation that could force the plant to shut down as early as Tuesday.

Representatives for Go Ethanol, its funders, creditors and customers met Thursday in Toledo at the U.S. Bankruptcy Court for the Northern District of Ohio to revisit the plant's Chapter 11 bankruptcy filing. They left after about an hour without having come to a conclusion.

The goal of Thursday's hearing was to get court approval for a second interim-funding plan that would keep the plant operating for at least the next two weeks. Company President Greg Kruger's attorney, Tim Hurley, said that extra time would allow the plant to continue running while it works out either a sale or reorganize under the bankruptcy protection. But it's a plan that requires either the banks or BP, the plant's lone customer, to step in and help.

"Right now I have the banks on one side and BP on the other and I'm stuck in the middle," Kruger said. "Everybody's positioning to put themselves in the best position."

The plan Hurley presented Thursday was based on BP continuing to buy ethanol from the plant and, most importantly, pay for it on a daily basis. The company has been doing that for the past two weeks, but said they would not continue the practice beyond today. As of Thursday morning, BP attorney Tim Carr said BP would not continue to pay past today, meaning without further assistance, GO Ethanol would be out of money and forced to commence shutdown by Tuesday.

Hurley said he would be meeting with lawyers for BP and the banks through the weekend in the hopes of working out a deal to keep the plant running.

"If everything goes well, it gets us two weeks," Hurley said. "We have no expectation of giving up the ghost."

Kruger said he has buyers interested in the plant, but wants to keep it running to help broker a deal and to make sure everybody gets paid, including his 60 employees.

"We just want to make sure everybody gets something and nobody gets nothing," Kruger said.

Earlier this month, Kruger filed Chapter 11 bankruptcy in U.S. Bankruptcy Court for the Northern District of Ohio. It was just five months ago that the plant began production, but a design flaw has forced them to use much more water than originally planned. That, along with troubles getting credit in the current market, forced the filing, Kruger said.

According to the filing, a missed deadline and a lien filed by contractors who worked on the plant contributed to the problems.

Kruger and his partners had originally planned to open at the end of February. Problems with a key contractor and two suppliers delayed completion and resulted in cost overruns and disputes with the contractors. The main electrical and mechanical contractor and other suppliers filed more than $5 million in liens against the project.

All that spooked the banks, resulting in amendments to the financing documents. That pushed the business "in a 'crisis mode' because weekto-week it was unclear if the Debtor would have available cash to conduct its business and complete plant construction," according to the filing.

The plant did finally begin production in July, but has faced a string of problems since, according to the filing. At the end of July, it experienced a power outage that shut them down for several days. In September, they had a week-long shutdown for maintenance and repairs.

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