VeraSun Energy (VSE) is preparing to file for bankruptcy protection, The Wall Street Journal reported Friday afternoon, citing people familiar with the situation.
VeraSun, which boomed along with ethanol production, has been hit hard as commodities prices have tumbled and ethanol projects have looked less desirable and less feasible.
The Journal said that details of the filing were still being settled Friday, citing the people familiar with the matter, and said it was still possible a filing could be forestalled.
The company has secured $250 million in debtor-in-possession financing from Ableco, an arm of New York-based hedge fund Cerberus, the Journal reported, adding that the loan would let VeraSun to continue to operate. That would boost the chances that the company's assets, such as ethanol distillation facilities and distribution networks, would hold their value, the Journal said. The loan would also buy VeraSun time to restructure.
Company creditors have already convened a committee to hammer out a potential restructuring, the Journal reported, citing a VeraSun bondholder. But it said a majority of creditors have to approve a restructuring deal in order for VeraSun to go before a judge to get approval for a prepackaged bankruptcy.
Verasun has hired law firm of Skadden, Arps, Slate, Meagher & Flom LLC as bankruptcy counsel, and is working with financial advisory firm Rothschild Inc., the Journal said.
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