Federal Bankruptcy Judge to Approve Sale Procedure for Central Illinois Energy Unfinished Ethanol Plant

Federal Bankruptcy Judge to Approve Sale Procedure for Central Illinois Energy’s Unfinished Ethanol Plant in Canton, IL; CIE Also Seeks Permission to Borrow $5.2 Million to Pay Off Debts

PEORIA — A federal bankruptcy judge in Peoria will be asked today to approve a sale procedure for an unfinished ethanol plant just outside Canton.

Central Illinois Energy’s bankruptcy attorney also is seeking permission to borrow another $5.2 million to pay bills, attorneys, bank fees and other costs.

Ground was broken in October 2006 for Central Illinois Energy’s plant. It was proposed as a $90 million project, powered by a coal co-generation plant, with a capacity of 37 million gallons of ethanol a year.

Central Illinois Energy Cooperative, made up of 260 farmer investors, invested money and corn in the project.

The plant was close to complete when its main contractor, Lurgi PSI of Memphis, left the site in November and filed a mechanic’s lien for $9.5 million of unpaid invoices. Attorneys for Lurgi said Central Illinois Energy was having a “liquidity crisis” that was disclosed to Lurgi in April 2007. Invoices after the April one were not paid in full, court records said.

Other contractors filed mechanic’s liens for $27 million in unpaid bills.

In December, almost all members of the Central Illinois Energy Board of Directors resigned. CIE General Manager Mike Smith also resigned.

The remaining board members, Jay Sutor and Suzanne Ginger, voted Dec. 13 to file for Chapter 11 bankruptcy. They had already hired Galesburg attorney Barry Barash to handle the case.

Barash said more than $130 million had been spent on the plant, and another $25 to $30 million would be needed to finish it. The investors had lost all their money.

Credit Suisse, the bank that financed the majority of the plant’s cost, and Whitebox Advisors, a Minneapolis hedge fund, now want to make an $80 million credit bid for the plant, according to court testimony and records.

Lurgi attorneys have opposed that purchase. They argue it would happen too quickly, and there is no guarantee what would happen to the mechanic’s lien claimants.

Also at today’s hearing, Barash is seeking approval of a $5.2 million budget to pay expenses from Feb. 25 to April 18. The budget includes a salary of $7,000 per week for chief reorganizational officer Brent King, a $100,000 “success fee” bonus for King, $85,000 in bonuses for other employees, just over $300,000 in fees for legal and financial advisers and $2.3 million in bank fees.

Lurgi attorneys also objected to the budget. They say it will fund bank expenses incurred before the bankruptcy filing and argue King should not be paid a “success fee.”

Also at issue today will be the contracts farmer investors signed to provide corn to the plant. They agreed to bring in a minimum of 5,000 bushels apiece for five years, not getting paid for the corn for five years after the facility became active or until the plant showed a certain level of profitability, whichever came earlier.

Some of those farmers, who have already lost thousands of dollars in the project, now say they’re concerned they will be bound to the contracts by the plant’s new owner. The contracts, if enforced, are estimated to be worth more than $100 million.

Barash said in court records he does not think the contracts are enforceable. Attorneys for Credit Suisse have said the contracts should be passed on to the plant’s new owner.

Reference:
The Register-Mail
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