Biofuel Energy Corp., an ethanol producer with a distillery in Fairmont, Minn., said it has $46 million in combined corn, ethanol and natural-gas hedge and mark-to-market losses and may restructure. Biofuel's shares plunged 63 percent.
The ethanol producer lacks the liquidity to satisfy all of the losses, Denver-based Biofuel said. Cargill Inc. holds the contracts and exercised its right to liquidate some of the agreements, the company said.
Biofuel's distilleries in Fairmont and in Wood River, Neb., have combined capacity of 230 million gallons annually. The company began production in June.
"It doesn't look very good; they could be headed for bankruptcy," said Ron Oster, an analyst at Broadpoint Capital Inc. in New York.
Biofuel shares plunged $1.59 to 93 cents. At Biofuel's initial public offering on June 7, the company sold 5.25 million shares at $10.50 each.
"All of these companies have some hedges. The problem is, [as] with any contract, they can gain in value or they can drop in value," said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston.
Biofuel locked contracts in place to protect against broad price swings. As corn and natural gas fell during the past month, the contracts became unprofitable. Natural gas futures have dropped 38 percent since peaking on July 3. Corn futures have declined 34 percent since June 27.
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