Red Trail Energy may file bankruptcy | TSLN.com

Red Trail Energy may file bankruptcy

Todd Neeley

OMAHA (DTN) – North Dakota ethanol producer Red Trail Energy LLC may be headed to bankruptcy or shutdown if the company is unable renegotiate its loan agreement with First National Bank of Omaha, according to a filing with the U.S. Securities Exchange Commission Friday.

Right now the 50-million-gallon plant in Richardton, N.D., expects to have enough money to operate through the end of 2009, “but that the level of available capital that we have left may be insufficient to sustain operations through the first quarter of 2010,” according to the SEC filing.

Red Trail (http://redtrailenergyllc.com/) is asking the lender to waive principal payments on its loan, after the company announced in March that it had defaulted.

“If we are unable to reach agreement with the bank on the terms of an agreement to waive principal, the company will be forced to evaluate other options, including bankruptcy or ceasing operations,” the SEC filing said.

Red Trail estimates that it would have to buy its corn supplies at 20 cents to 30 cents below market prices this year to maintain cash flow.

In an attempt to overcome deteriorating market conditions, according to the SEC filing, Red Trail has already taken several steps.

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The company temporarily suspended employee bonuses and eliminated management bonuses last year. CEO Mick Miller took voluntary pay cuts totaling $45,000 annually, according to the SEC filing. The members of the company’s board of governors opted out of compensation they receive for attending board and committee meetings.

In addition, the company has adjusted its hedging strategy, including procuring more corn from North Dakota farmers and less via rail to save on transportation costs, the SEC filing said. Red Trail also has taken steps to improve efficiency at the plant.

Red Trail produced nearly 55 million gallons of ethanol in 2008, according to the SEC filing, or about 110 percent of nameplate production capacity.