Ethanol maker VeraSun files for bankruptcy
A sign of trouble in the ethanol business, VeraSun seeks bankruptcy protection after a rapid decline in corn prices and a misplaced bet on feedstock purchases.
VeraSun Energy, an ethanol producer that failed to foresee a drop in corn prices earlier this year, filed for bankruptcy protection Friday.
The Sioux Falls, S.D.-based company said it will continue to operate during bankruptcy, including making feedstock purchases and paying employees.
VeraSun, which claims to be the biggest ethanol producer in the United States, has run out of cash because of a change in its hedging strategy for purchasing corn. The global credit crisis has also hampered its ability to raise operating funds.
"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," CEO said Don Endres said in a statement.
Earlier this year, the company locked into corn prices at a time when heavy rains in the Midwest dimmed the prospect for this year's corn harvest. Ethanol, used as an additive to gasoline, is made primarily from corn today.
However, the harvest turned out to be better than feared. Then a drop in economic activity further depressed prices, cutting the price per bushel roughly in half from its peak.
The bankruptcy filing had been rumored for weeks, sending the company's stock price below $1 per share last week.
A number of ethanol producers that have had to declare bankruptcy in the past year because of volatile feedstock prices, one of the main costs in making ethanol.