Pacific Ethanol enters new debt agreement

Shares of Pacific Ethanol Inc. dropped about 4 percent in trading Monday, after the ethanol producer and marketer detailed an agreement that resolves almost $35 million of debt.

Socius CG II Ltd. has agreed to take over $34.7 million of Pacific Ethanol debt from Lyles United LLC and its affiliate, Lyles Mechanical Co. A Los Angeles court approved the deal Friday.

Socius purchased $5 million of the Pacific Ethanol debt from Lyles, with plans to buy the remaining debt in $5 million tranches. In exchange, Socius will receive free-trading shares of Pacific Ethanol at a 20 percent discount. Under the agreement, Socius cannot exceed 9.99% of Pacific Ethanol stock, according to details submitted to the Securities and Exchange Commission on Monday.

“We are pleased to have Socius as a new financial partner as we pursue our mission to be a leading producer and marketer of low carbon renewable fuels,” Pacific Ethanol CEO Neil Koehler said in a news release. “This transaction supports our strategy to reduce debt, efficiently operate our production assets and lower expenses. We believe this puts the company in a stronger financial position to complete the reorganization of our ethanol plant subsidiaries currently the subject of chapter 11 proceedings.”

The Sacramento-based company put much of its ethanol-producing operations into bankruptcy protection in May. The parent company did not file for bankruptcy protection.

Last year, Pacific Ethanol halted production at three of its four plants — in Burley, Idaho; Madera and Stockton — because of unfavorable market conditions. Only a plant in Boardman in Oregon remained operating. The plants combined have the capacity to produce 200 million gallons annually, according to a company quarterly report. Pacific Ethanol also owns 42 percent of Front Range Energy LLC, which owns a plant in Windsor, Colo., with an annual production capacity of up to 50 million gallons.

In January, the company announced it had resumed production at its 60 million-gallon-a-year facility in Burley.

It has been a busy several weeks for Pacific Ethanol. The company regained compliance with Nasdaq, after its shares topped $1 for 10 consecutive trading days, lifting the demand in January. Shares topped $1 on Jan. 8, and have remained above that threshold since. Companies are delisted if their shares drop below $1 for an extended period.

Shares of Pacific Ethanol (NASDAQ: PEIX) declined 7 cents to $1.98 in trading Monday.