by Rich Bowden
November 2 2008
VeraSun Energy, one of the major producers of ethanol in the U.S., has filed for bankruptcy after citing rising costs and liquidity problems.
In a statement released Friday, the company said a series of events had caused the move, including a rise in the price of corn, worsening capital market conditions and a tightening of trade credit.
The company said it intends to continue trading during the Chapter 11 proceedings and will fulfil all obligations to its customers.
"Today’s filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company’s long-term future," said company CEO Don Endres. "We appreciate the loyalty of our employees, customers and suppliers during this challenging time."
The downturn in the company's fortunes has been seen by analysts as a result of the dramatic recent economic contraction.
"The current financial climate makes one forget how completely different the world was 6 short months ago," said financial commentator Tim Plaehn in an article for Seeking Alpha.
"Commodity prices were zooming up. Oil was on its way to $150 with most predicting $200 by now. If the predictions of the spring and early summer had been accurate, VeraSun would have been generating huge profits in the 3rd quarter rather than being pushed into bankruptcy. The lesson here is that thin margin businesses are one bad economic turn away from disaster."
VeraSun reported a loss of $63 million USD to $103 million USD in September and then attempted to raise $20 million USD in a public offering before cancelling the move.
VeraSun is one of the country's largest ethanol producers, with operations based in South and North Dakota, Indiana, Ohio, Nebraska, Minnesota, Iowa and Michigan.
VeraSun Energy, one of the major producers of ethanol in the U.S., has filed for bankruptcy after citing rising costs and liquidity problems.
In a statement released Friday, the company said a series of events had caused the move, including a rise in the price of corn, worsening capital market conditions and a tightening of trade credit.
The company said it intends to continue trading during the Chapter 11 proceedings and will fulfil all obligations to its customers.
"Today’s filing allows VeraSun to address its short-term liquidity constraints as we navigate historically challenging market conditions while we focus on restructuring to address the company’s long-term future," said company CEO Don Endres. "We appreciate the loyalty of our employees, customers and suppliers during this challenging time."
The downturn in the company's fortunes has been seen by analysts as a result of the dramatic recent economic contraction.
"The current financial climate makes one forget how completely different the world was 6 short months ago," said financial commentator Tim Plaehn in an article for Seeking Alpha.
"Commodity prices were zooming up. Oil was on its way to $150 with most predicting $200 by now. If the predictions of the spring and early summer had been accurate, VeraSun would have been generating huge profits in the 3rd quarter rather than being pushed into bankruptcy. The lesson here is that thin margin businesses are one bad economic turn away from disaster."
VeraSun reported a loss of $63 million USD to $103 million USD in September and then attempted to raise $20 million USD in a public offering before cancelling the move.
VeraSun is one of the country's largest ethanol producers, with operations based in South and North Dakota, Indiana, Ohio, Nebraska, Minnesota, Iowa and Michigan.
http://www.thetechherald.com/article.php/200844/2371