UPDATE 2-Aventine warns it may need to seek bankruptcy

Mon Mar 16, 2009 7:20pm EDT

Related Topics

* Aventine warns may need to seek bankruptcy protection

* Posts quarterly loss, says in default of some debt

* Shares extend losses after hours

* Verenium receives going concern qualification (Adds details on Verenium going concern qualification)

NEW YORK, March 16 (Reuters) - Corn ethanol maker Aventine Renewable Energy Holdings Inc AVR.N said on Monday it was in default on some its debt payments and may need to seek Chapter 11 bankruptcy protection.

The company said it was seeking to raise capital, "including seeking additional debt and equity financing and a potential sale of all or part of the company," but that it could seek bankruptcy protection soon if it those efforts were unsuccessful.

Also on Monday, cellulosic ethanol maker Verenium Corp's VRNM.O auditors questioned its ability to continue as a going concern.

The news from both Aventine and Verenium comes four-and-a-half months after their larger peer, VeraSun Energy Corp VSUNQ.OB, filed for bankruptcy protection.

The margins to produce ethanol have been squeezed by weaker gasoline prices, despite U.S. government mandates requiring gasoline blenders to buy the biofuel.

Aventine, which also reported a fourth quarter loss of $36.9 million, or 86 cents per share, compared to a profit of $3.3 million, or 8 cents per share, a year earlier, said it did not have the cash to make a $15 million interest payment due April 1 or the $24.4 million it owes builder Kiewit Energy Co.

Kiewit built some ethanol-producing plants for Aventine.

Aventine, based in Pekin, Illinois, is in default on $300 million in 10 percent fixed-rate notes because of the money it owes Kiewit. That default would allow holders of the $300 million in debt to accelerate payments to them upon 60 days notice.

Kiewit canceled is contracts with Aventine after the ethanol maker missed a Dec. 31 payment. Aventine said it hoped to negotiate a payment settlement.

"We cannot give you any assurance that we will reach an agreement with Kiewit that works within our existing liquidity constraints," the company said in a statement.

As of March 12, Aventine had $700,000 in cash and $6.6 million in borrowing capacity under its current facilities.

Meanwhile, Verenium's outside auditor, Ernst & Young, said in a U.S. Securities and Exchange Commission filing that the company's working capital deficit of $23.8 million and accumulated deficit of $622.6 million as of Dec. 31 "raise substantial doubt about its ability to continue as a going concern."

In its quarterly SEC filing, Verenium said it may need additional sources of cash or the reduction or elimination of planned expenditures to fund its operating expenses, capital spending, debt payments and working capital requirements through Dec. 31 of this year.

Verenium produces ethanol from nonfood feedstocks such as agricultural waste and wood products. It formed a joint venture with BP Plc (BP.L) to develop cellulosic ethanol last month.

Verenium shares closed at 39 cents Monday on the Nasdaq. Shares in Aventine fell to 12 cents per share in after-hours trading after closing down 9.7 percent at 28 cents on the New York Stock Exchange. (Reporting by Matt Daily; editing by Toni Reinhold and Andre Grenon)

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