Item
1.01. Entry
Into a Material Definitive Agreement.
Credit
Agreement
Certain
indirect wholly-owned subsidiaries of Pacific Ethanol, Inc. (the “Company”),
specifically, Pacific Ethanol Holding Co. LLC, Pacific Ethanol Madera LLC,
Pacific Ethanol Columbia, LLC, Pacific Ethanol Stockton, LLC, Pacific Ethanol
Imperial, LLC, and Pacific Ethanol Magic Valley, LLC (the “Borrowers”), have
entered into that certain Credit Agreement, dated as of February 27, 2007
(the
“Credit Agreement”), by and among the Borrowers, the lenders party thereto,
WestLB AG, New York Branch, as administrative agent, lead arranger and
sole
bookrunner, WestLB AG, New York Branch, as collateral agent, Union Bank
of
California, N.A., as accounts bank, Mizuho Corporate Bank, Ltd., as lead
arranger and co-syndication agent, CIT Capital Securities LLC, as lead
arranger
and co-syndication agent, Cooperative Centrale Raiffeisen-Boerenleenbank
BA.,
“Rabobank Nederland”, New York Branch, as lead arranger and co-documentation
agent, and Banco Santander Central Hispano S.A., New York Branch, as lead
arranger and co-documentation agent. The Credit Agreement provides for
(1) a
construction loan facility in an aggregate amount of up to $300 million
which
matures on the earlier of October 27, 2008 and the date the construction
loans
made thereunder are converted into term loans (the “Conversion Date”), (2) a
term loan facility in an aggregate amount of up to $300 million which matures
on
the date which is 84 months after the Conversion Date, and (3) a working
capital
and letter of credit facility in an aggregate amount of up to $25 million
which
matures on the date which is 12 months after the Conversion Date. In addition,
the Borrowers have the ability from time to time to renew all or a portion
of
the commitments of the lenders under the working capital and letter of
credit
facility, subject to the approval of the applicable lender. The primary
purpose
of the credit facility is to provide debt financing in connection with
the
development, construction, installation, engineering, procurement, design,
testing, start-up, operation and maintenance of the Borrowers’ Madera,
California; Stockton, California; Boardman, Oregon; Burley, Idaho; and
Brawley,
California ethanol plants.
During
the term of the working capital and letter of credit facility, the Borrowers
may
borrow, repay and re-borrow amounts available under the working capital
and
letter of credit facility. Loans made under the construction loan or the
term
loan facility may not be re-borrowed once repaid or prepaid. Loans made
under
the construction loan facility do not amortize, and are fully due and payable
on
their maturity date. The term loan facility is intended to refinance the
loans
made under the construction loan facility. Loans made under the term loan
facility amortize at a 6.0% per annum rate from and after the Conversion
Date,
and the remaining principal amounts are fully due and payable on their
maturity
date. Loans made under the working capital and letter of credit facility
are
fully due and payable on their maturity date.
The
Borrowers have the option to select floating or periodic fixed-rate loans
under
the terms of the Credit Agreement. Depending upon the type of loan and
whether
the loan is made under the construction loan facility, the term loan facility
or
the working capital and letter of credit facility, loans under the Credit
Agreement bear interest at rates ranging from 2.25% to 4.50% over the selected
fixed or floating interest rate. Interest on floating rate loans is payable
quarterly in arrears, while interest on the various fixed-rate loans available
under the credit facility is payable quarterly (or if earlier at the end
of
selected interest periods ranging from one to six months).
The
Borrowers pay a quarterly commitment fee 0.50% of the unused portion of
the
construction loan facility and the working capital and letter of credit
facility. In addition to the quarterly commitment fee described above,
the
Borrowers are also required to pay certain letter of credit and related
fronting
fees and other administrative fees pursuant to the terms of the Credit
Agreement.
Borrowings
and the Borrowers’ other obligations under the credit facility and any related
interest rate hedging agreements are secured by a first-priority security
interest in all of the equity interests in the Borrowers and substantially
all
the assets of the Borrowers.
Loans
outstanding under the Credit Agreement are subject to mandatory prepayment
in
certain circumstances, including, but not limited to, mandatory prepayments
based upon receipt of certain proceeds of asset sales, casualty proceeds
and
termination payments. In addition, the Borrowers must prepay loans under
the
working capital and letter of credit facility from time to time if the
prevailing borrowing base is less than the aggregate amount of such loans.
Loans
and
letters of credit under the credit facility are subject to conditions precedent,
including, among others, the absence of a material adverse effect; the
absence
of defaults or events of defaults; the accuracy of certain representations
and
warranties; the maintenance of a debt to equity ratio which is not in excess
of
65:35; title insurance date-downs; payment of fees and expenses; the
contribution of all required equity, which is anticipated to be approximately
$218.8 million in the aggregate; obtainment of required contracts, permits
and
insurance; and certain certifications from the independent engineer in
respect
of construction progress. Loans and letters of credit under the credit
facility
are also generally not available for the Madera plant or the Boardman plant
until its completion. Also, the Borrowers may not be able to fully utilize
the
credit facility if the completed ethanol plants fail to meet certain minimum
performance standards. Finally, disbursements from the construction and
term
facility are limited to a percentage of project costs of the corresponding
plant
and in any event are not to exceed approximately $1.15 per gallon of annual
production capacity of the plant.
The
Company expects to achieve a senior debt to equity ratio of approximately
55:45
upon commencement of commercial operations of each of the Madera and Boardman
ethanol plants. The Company expects to achieve a senior debt to equity
ratio of
approximately 35:65 during the construction phase of each of the Burley,
Stockton, and Brawley ethanol plants. Upon commencement of commercial operations
of each of these plants, the Company expects to draw additional funds to
increase the senior debt to equity ratio to approximately 55:45.
The
Credit Agreement and the related loan documentation include, among other
terms
and conditions, limitations (subject to specified exclusions) on the Borrowers’
ability to make asset dispositions; merge or consolidate with or into another
person or entity; create, incur, assume or be liable for indebtedness;
create,
incur or allow liens on any property or assets; make investments; declare
or
make specified restricted payments or dividends; enter into new material
agreements; modify or terminate material agreements; enter into transactions
with affiliates; change their line of business; and establish bank accounts.
In
addition, the Credit Agreement and the related loan documentation, among
other
terms and conditions, require (subject to specified exclusions) the Borrowers
to
complete their respective ethanol plants by October 27, 2008; maintain
adequate
and specified insurance; maintain their separate existence from their upstream
affiliates (including the Company); provide the lenders’ with a first-priority
security interest in the collateral; maintain an interest rate and commodity
hedge protection program; and comply with laws and permits.
The
Company’s aggregate transaction expenses (including investment banking fees and
legal costs) in connection with the negotiation, documentation and closing
of
the credit facility are estimated to be $10.8 million. In addition, the
Borrowers are responsible for certain of the agents’, the lenders’ and their
consultants’ and legal counsel’s on-going costs and expenses related to the
credit facility.
The
description of the Credit Agreement does not purport to be complete and
is
qualified in its entirety by reference to the Credit Agreement, which is
filed
as Exhibit 10.1 to this report and incorporated by reference herein.
Sponsor
Support Agreement
In
connection with and as a condition to closing under the credit facility
described above, the Company entered into that certain Sponsor Support
Agreement, dated as of February 27, 2007, among Pacific Ethanol Holding
Co. LLC,
WestLB AG, New York Branch, as administrative agent (the “Administrative
Agent”), and the Company (the “Sponsor Support Agreement”). Under the Sponsor
Support Agreement, the Company provides limited contingent equity support
in
connection with the development, construction, installation, engineering,
procurement, design, testing, start-up and maintenance of the Borrowers’
Boardman, Oregon; Burley, Idaho; Stockton, California; and Brawley, California
ethanol plants. In particular, the Company has agreed to contribute to
the
Borrowers up to approximately $14.6 million (for the Stockton ethanol plant),
approximately $13.4 million (for the Burley ethanol plant) and approximately
$14.3 million (for the Brawley ethanol plant) (collectively, the “Sponsor
Funding Cap”) of contingent equity in the event the Borrowers’ have insufficient
funds to either pay their project costs (other than debt service under
the
credit facility described above) as they become due and payable or cause
such
ethanol plants to be completed by the Conversion Date. The amount of the
Sponsor
Funding Cap can be increased or decreased over time in order to ensure
that the
Company is providing contingent equity through the completion of the Stockton,
Burley and Brawley ethanol plants in an amount equal to 25% of the construction
costs associated with such plants. Furthermore, the unused portions of
the
Sponsor Funding Cap attributable to such plants may be re-allocated upon
the
completion of such plant to the Sponsor Funding Cap of the other ethanol
plants
which have not yet been completed and have used at least 50% of their budgeted
contingency or used for warranty work as described, and for the plants
identified, in the paragraph immediately below.
In
addition, to the extent not performed by third-party suppliers, vendors
or
contractors and subject to specified exclusions, the Company has agreed
to
provide a warranty with respect to the Boardman, Oregon; Burley, Idaho;
Stockton, California; and Brawley, California ethanol plants. The term
of the
warranty is one year from the date such ethanol plant achieves commercial
operations. The term of the warranty is one year from the date such ethanol
plant achieves commercial operations, and may be extended for an additional
one
year term limited to warranty repairs during the initial one year period.
The
Company’s obligations under the warranty are capped at the Sponsor Funding Cap
(as the same may have been previously reduced in connection with the Company’s
prior contingent equity contributions).
The
Administrative Agent has the right to request that the Company cash
collateralize, provide a letter of credit or otherwise contribute the Company’s
limited contingent equity upon the acceleration of the loans under the
credit
facility described above.
The
Company has the right to receive reimbursement for certain of the Company’s
contingent equity payments, including under certain circumstances from
the
proceeds of loans under the credit facility described above and liquidated
damage and warranty payments made by third-party suppliers, vendors or
contractors.
Until
the
Company’s contingent equity obligations have been fully performed or the
warranty period has expired, the Company may not incur any secured indebtedness
for borrowed money, grant liens on the Company’s assets or provide any secured
credit enhancements in an aggregate amount in excess of $10 million unless
the
Company provides the lenders under the credit facility with the same liens
or
credit support.
The
Company’s obligations under the Sponsor Support Agreement will terminate on the
earlier of the date the Company’s contingent equity obligations have been fully
performed, the date the warranty period has expired and the date the loans
and
the Borrowers’ other obligations under the credit facility described above have
been repaid in full and satisfied.
The
description of the Sponsor Support Agreement does not purport to be complete
and
is qualified in its entirety by reference to the Sponsor Support Agreement,
which is filed as Exhibit 10.2 to this report and incorporated by reference
herein.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet
Arrangement of a Registrant.
(a)
On
February 27, 2007, the Company, through certain indirect wholly-owned
subsidiaries, obtained a credit facility by entering into the Credit Agreement
and Sponsor Support Agreement, as described above under Item 1.01 The
disclosures contained above under Item 1.01 are incorporated herein by
reference.
(b)
Not
applicable.
Item
9.01. Financial
Statements and Exhibits.
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(a) |
Financial
Statements of Businesses Acquired.
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None.
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(b) |
Pro
Forma Financial Information.
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None.
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10.1 |
Credit
Agreement, dated as of February 27, 2007, by and among Pacific
Ethanol
Holding Co. LLC, Pacific Ethanol Madera LLC, Pacific Ethanol
Columbia,
LLC, Pacific Ethanol Stockton, LLC, Pacific Ethanol Imperial,
LLC, and
Pacific Ethanol Magic Valley, LLC, as borrowers, the lenders
party
thereto, WestLB AG, New York Branch, as administrative agent,
lead
arranger and sole book runner, WestLB AG, New York Branch, as
collateral
agent, Union Bank of California, N.A., as accounts bank, Mizuho
Corporate
Bank, Ltd., as lead arranger and co-syndication agent, CIT Capital
Securities LLC , as lead arranger and co-syndication agent, Cooperative
Centrale Raiffeisen-Boerenleenbank BA., “Rabobank Nederland”, New York
Branch, and Banco Santander Central Hispano S.A., New York
Branch
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10.2 |
Sponsor
Support Agreement, dated as of February 27, 2007, by and among
Pacific
Ethanol, Inc., Pacific Ethanol Holding Co. LLC and WestLB AG,
New York
Branch, as administrative agent
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Date:
March 5, 2007
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PACIFIC
ETHANOL, INC.
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By:
/S/
CHRISTOPHER W. WRIGHT
Christopher
W. Wright
Vice
President, General Counsel & Secretary
EXHIBITS
FILED WITH THIS REPORT
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10.1 |
Credit
Agreement, dated as of February 27, 2007, by and among Pacific
Ethanol
Holding Co. LLC, Pacific Ethanol Madera LLC, Pacific Ethanol
Columbia,
LLC, Pacific Ethanol Stockton, LLC, Pacific Ethanol Imperial,
LLC, and
Pacific Ethanol Magic Valley, LLC, as borrowers, the lenders
party
thereto, WestLB AG, New York Branch, as administrative agent,
lead
arranger and sole book runner, WestLB AG, New York Branch, as
collateral
agent, Union Bank of California, N.A., as accounts bank, Mizuho
Corporate
Bank, Ltd., as lead arranger and co-syndication agent, CIT Capital
Securities LLC, as lead arranger and co-syndication agent, Cooperative
Centrale Raiffeisen-Boerenleenbank BA., “Rabobank Nederland”, New York
Branch, and Banco Santander Central Hispano S.A., New York
Branch
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10.2 |
Sponsor
Support Agreement, dated as of February 27, 2007, by and among
Pacific
Ethanol, Inc., Pacific Ethanol Holding Co. LLC and WestLB AG,
New York
Branch, as administrative
agent
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