Pacific Ethanol, ACECo form JV as PEIX strengthens balance sheet
In California, Pacific Ethanol announced agreements to refinance its term debt that was due in September and solidify its relationship with Aurora Cooperative Elevator Company (ACE) at its Aurora plants.
Pacific Ethanol entered into an agreement to refinance its $155.1mn in principal term debt, due September 2017. The refinancing will reduce total debt outstanding by $12mn and interest costs by more than $8mn annually. The company has obtained a new, five year, amortizing loan from CoBank and First farm credit for $64mn, and a revolving line of credit for $32mn, which bears interest at LIBOR +3.75%. Additionally, the company has obtained $55mn from a three year, senior note, secured by the company’s western assets, which will bear initial interest at LIBOR +7%, and has no prepayment penalty.
The company further announced that it has entered into an agreement with Aurora Cooperative Elevator Company (ACE), regarding the creation of a newly created company, Pacific Aurora, LLC. Pacific Ethanol will contribute its Aurora plant assets into the new company, while ACE will contribute its Aurora West Grain Elevator, loop track, related land and other assets for a 12% stake in the JV. Pacific Ethanol will also sell an additional 14% interest to ACE for $30mn cash. Pacific Ethanol will retain a 74% stake in PAL, while ACE will retain a 26% stake. The transaction values the 14% stake in the facilities’ 155mn gallon of production at ~$1.20/gallon. PAL will obtain a five year amortizing, revolving term loan of $30mn from CoBank, which will bear interest at LIBOR plus 4%. The agreement should reduce opex by over $5mn annually.
Cowen & Company analyst Jeffrey Osborne wrote, “The moves provided liquidity to strengthen the company’s balance sheet and we believe should remove some of the negative sentiment that had hung over the stock. The JV with ACE should streamline production at the Aurora facilities and improve economics. We update our estimates to reflect the current commodity prices as well as the impact of the refinancing and minority interest due to ACE.”
Category: Fuels
