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VeraSun Energy of Sioux Falls, S.D., filed for Chapter 11 bankruptcy protection last week. VeraSun operates 14 ethanol plants, five of which are in Iowa.
Chapter 11 reorganization is the form of bankruptcy that allows business debtors temporary protection from creditors while they obtain new financing and reorganize.
Northey said VeraSun is "working to continue operations and pay its corn suppliers." VeraSun separately announced Tuesday that it has received $215 million in debtorin-possession financing from AgStar Financial Services of Mankato, Minn., to pay obligations while it is reorganizing under bankruptcy. The company is in negotiations with lenders to secure $35 million in additional financing.
Northey said his department's Grain Warehouse Bureau is responsible for licensing and inspecting ethanol plants and grain dealers to protect those selling grain to the facilities. It also manages the Iowa Grain Indemnity Fund, which provides financial protection to farmers.
The fund covers farmers with grain on deposit in Iowalicensed warehouses and grain sold to Iowa-licensed grain dealers. If a state-licensed warehouse fails, the fund will pay farmers 90 percent of a loss on grain up to a maximum of $150,000 per claimant.
The fund had $8.2 million on hand at the end of June.
However, Northey noted that grain sold using a creditsale contract is not covered. In such contracts, farmers sell and deliver grain to a grain dealer, but payment to the farmer is deferred.
If a credit-sale contract is not issued, the grain must be paid for on demand, or within 30 days of delivery if no demand is made.
The Grain Indemnity Fund was created by assessing a quarter of a cent per bushel of grain handled by warehouse operators and grain dealers. It also collects annual fees from grain dealers' license holders.
VeraSun also said it has delayed the startup of a 110million-gallon-per-year ethanol plant it has constructed in Janesville, Minn., which it took over in April after its acquisition of U.S. Bioenergy. Most of the 53 employees will be laid off immediately.
-- Contact the writer: (319) 398-8317 or david.dewitte@gazcomm.com
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