Pacific Ethanol refinances $155.1 million in principal term debt

In California, Pacific Ethanol is refinancing its $155.1 million principal term debt, due in September 2017, and expanding its business through the following transactions:

• • Pacific Ethanol will obtain a new five-year term amortizing loan from CoBank and First Farm Credit in the amount of $64.0 million and a revolving line of credit of $32.0 million secured by its Pekin assets. This loan bears interest at LIBOR plus 3.75%.
• • Pacific Ethanol will also obtain $55.0 million from a three-year senior note offering secured by Pacific Ethanol’s ownership interest in its Western assets. The senior notes will bear initial interest at LIBOR plus 7.00%. The senior notes will have no prepayment penalty.
• • Pacific Ethanol has entered into an agreement with the Aurora Cooperative Elevator Company (ACEC), whereby Pacific Ethanol will contribute its Aurora plant assets into a newly created company, Pacific Aurora, LLC (PAL), and ACEC will simultaneously contribute its Aurora West Grain Elevator, loop track, related land and other assets into PAL. In addition, Pacific Ethanol will sell a 14% interest in PAL to ACEC for $30.0 million in cash. These transactions will result in Pacific Ethanol owning 74% and ACEC owning 26% of the combined ethanol production, grain elevator and rail facilities in Aurora, Nebraska. To further strengthen liquidity, PAL will obtain a five-year amortizing, revolving term loan of $30 million from CoBank secured by PAL’s assets. This loan will bear interest at LIBOR plus 4.00%.
• • Pacific Ethanol will use the combined proceeds to repay the $155.1 million in outstanding principal and accrued and unpaid interest owed under the terms of its existing term loans. The debt refinancing reduces total debt outstanding by more than $12 million and reduces annual interest costs by over $8 million. PAL will be a fully consolidated subsidiary of Pacific Ethanol and is expected to reduce operating costs by over $5 million annually. Excess proceeds will strengthen Pacific Ethanol’s cash and working capital positions and will be used for general corporate purposes.
• • Pacific Ethanol, in connection with the refinancing, will also increase Kinergy’s line of credit facility with Wells Fargo by $10.0 million, from $75.0 million to $85.0 million, to provide additional liquidity to Kinergy, its ethanol marketing subsidiary.

Pacific Ethanol: The Digest’s 2015 5 Minute Guide