West Ventures acquires the Purified Renewable Energy plant.
A shuttered ethanol plant in Buffalo Lake, Minn., is being turned over to its lender under a court order Monday that leaves most creditors unpaid.
U.S. Bankruptcy Judge Katherine Constantine awarded Purified Renewable Energy’s assets to West Ventures, a unit of a New York hedge fund that financed the plant’s rebirth last year after a four-year shutdown. That revival faltered amid losses, fires and other problems, and production halted in March.
It is not clear when production might resume, but since the Chapter 11 case was filed in March, the plant has been kept in a state that would allow it to reopen.
Under the sale order, West Ventures acquired the plant for $5 million, but doesn’t have to pay that in cash. The amount is being subtracted from the more than $18 million West Ventures loaned to Purified Renewable Energy, the company formed to acquire and reopen the plant. Some creditors’ bills also must be addressed by West Ventures.
The 1997-era plant, one of the smallest in the state, faltered during its restart as the 2012 drought drove up the price of corn. Two fires in the plant and a lingering problem with wastewater compliance further hampered its revival.
Some encouraging signs
Its shutdown came as many U.S. ethanol plants have struggled to stay open or at least in the black. One other Minnesota plant remains closed, but in recent quarters, some plants have managed to turn out small profits as corn prices moderated.
In the bankruptcy auction, only West Ventures made a bid on the plant. Another company expressed interest, but didn’t officially bid.
Creditors on the hook
“Most of the creditors are not getting anything out of this,” said David Runck, an attorney in Eden Prairie who represents unsecured creditors of the plant in Buffalo Lake, 75 miles west of Minneapolis.
One big creditor is Minnesota Energy, the farmers cooperative that once owned and operated the plant. It’s still owed $5.4 million on a note from the sale last November, Runck said. Other creditors are owed another $5 million, he said.
Before the bankruptcy filing, the plant’s former managers sued West Ventures, accusing the company of threats and other wrongdoing when it dismissed them earlier this year. West Ventures countered that management didn’t do its duty.
The former managers’ lawsuit in state court later was dropped. However, two bankruptcy court battles are pending.
One case brought by creditors and set for trial in December alleges, among other things, that West Ventures breached its fiduciary duty when it declared the operation in default and seized control of the Purified board of directors in March.
West Ventures denies wrongdoing.