White Energy, Inc. “”White Energy” or the “Debtor”), one of the largest ethanol and gluten producers in the United States, filed for bankruptcy in the United States Bankruptcy for the District of Delaware on May 7, 2009. According to its Declaration in Support of First Day Motions (the “Declaration”), White Energy generated over $500 million in revenue in 2008. Based in Dallas, Texas, White Energy operates three ethanol production facilities in Kansas and Texas.
White Energy produces both ethanol and gluten (an ingredient used by food producers) at its Russell, Kansas facility. As stated in its Declaration, the Debtor processes wheat to make gluten. White Energy uses starch, a byproduct from gluten production, in its ethanol production. By doing so, White Energy is able to reduce its overall costs to produce ethanol.
In July of 2006, White Energy entered into a $298 million senior secured loan with WestLB as administrative agent. Leading up to bankruptcy, White Energy’s lenders declared several events of default under the secured loan, including (i) a failure to pay property taxes, (ii) failure to make payments under construction contracts and (iii) failure to pay franchise taxes. White Energy tried unsuccessfully to get its lenders to agree to restructure its debt. Unable to reach an agreement with its lenders, White Energy soon filed for bankruptcy.
According to White Energy’s bankruptcy petition, the following entities hold the ten largest unsecured claims against this debtor:
- ADM … $2.9 million
- The Scoular Co. … $1.8 million
- Novozymes NA … $608,526
- Nexen … $379,113
- City of Hays … $346,056
- Oneok Energy … $317,000
- Russell County … $290,457
- Milbank Tweed … $208,731
- Univar USA … $134,385
- Occidental Chemical … $114,170
White Energy entered into the ethanol industry in 2006. Since then, commodity prices have become exceptionally volatile with corn prices reaching double their normal price per bushel. At the same time that commodity prices reached historic highs, the oversupply of ethanol has kept prices low. The resulting low profit margins strained White Energy’s cash flow, which in turn led to loan defaults and bankruptcy.
This bankruptcy proceeding is before the Honorable Christopher S. Sontchi.