SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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Date
of Report (Date of earliest event reported)
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May 17, 2009
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PACIFIC ETHANOL, INC.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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000-21467
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41-2170618
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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400 Capitol Mall, Suite 2060, Sacramento, CA
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95814
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code:
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(916) 403-2123
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(Former
name or former address, if changed since last
report)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01
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Entry
into a Material Definitive
Agreement.
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The
information set forth in Item 2.03 of this report is incorporated herein by
reference.
Amendment
and Waiver Agreement dated May 17, 2009 by and between Wachovia Capital Finance
Corporation (Western), Kinergy Marketing LLC and Pacific Ethanol,
Inc.
On May
17, 2009, Kinergy Marketing LLC (“Kinergy”), a wholly-owned subsidiary of
Pacific Ethanol, Inc. (the “Company”), and the Company, entered into an
Amendment and Waiver Agreement (the “Amendment”) dated May 17, 2009 with
Wachovia Capital Finance Corporation (Western) (“Wachovia”). The Amendment
relates to a $10.0 million credit facility for Kinergy under a Loan and Security
Agreement dated July 28, 2008 by and among Kinergy, the parties thereto from
time to time as the Lenders, Wachovia and Wachovia Bank, National Association,
as amended by a Letter re: Amendment and Forbearance Agreement dated February
13, 2009, an Amendment No. 1 to Letter re: Amendment and Forbearance
Agreement dated as of February 26, 2009 and an Amendment No. 2 to Letter
re: Amendment and Forbearance Agreement dated as of March 27, 2009
(collectively, the “Loan Agreement”). Kinergy’s credit facility is
described in more detail under the heading “Wachovia Loan Transaction”
below.
Under the
Amendment, Kinergy’s monthly unused line fee payable to Wachovia increased from
0.375% to 0.500% of the amount by which the maximum credit under the credit
facility exceeds the average daily principal balance. In addition,
the Amendment imposes a new $5,000 monthly servicing fee payable to
Wachovia. The Amendment also limits most payments that may be made by
Kinergy to the Company as reimbursement for management and other services
provided by the Company to Kinergy to $600,000 in any three month period and
$2,400,000 in any twelve month period. The Amendment amends the
definition of “Material Adverse Effect” to exclude the Bankruptcy Filing
described below and certain other matters and clarifies that certain events of
default do not extend to the Company’s subsidiaries that are subject to the
Bankruptcy Filing. However, the Amendment further made many events of
default that previously were applicable only to Kinergy now applicable to the
Company and its subsidiaries except for certain specified subsidiaries including
the Company’s subsidiaries that filed for bankruptcy
protection. Under the Amendment, the term of the credit facility was
reduced from three years to a term expiring on October 31, 2010. The
Amendment also deleted the early termination fee that would be payable in the
event Kinergy terminated the credit facility prior to the conclusion of the
term. In addition, the Amendment revised Kinergy’s EBITDA
covenants. The Amendment also prohibited Kinergy from incurring any
additional indebtedness (other than certain intercompany indebtedness) or making
any capital expenditures in excess of $100,000 absent Wachovia’s prior
consent. Further, under the Amendment, Wachovia waived all existing
defaults under the Loan Agreement.
The
Amendment requires that, on or before May 31, 2009, Wachovia shall have received
copies of financing agreements, in form and substance reasonably satisfactory to
Wachovia, among the Company and certain of its subsidiaries and Lyles United,
LLC (“Lyles”), which agreements shall provide, among other things, for (i) a
credit facility available to the Company of up to $2,500,000 over a term of
eighteen months (or such shorter term but in no event prior to the maturity date
of the Loan Agreement), (ii) the grant by the Company to Lyles of a security
interest in substantially all of the Company’s assets, including a pledge by the
Company to Lyles of the equity interest of the Company in Kinergy, and (iii) the
use by the Company of borrowings thereunder for general corporate and other
purposes in accordance with the terms thereof.
Kinergy
is required to pay an amendment fee of $200,000 to Wachovia. The Amendment also
contains other customary representations, warranties, covenants and other
obligations.
The
description of the Amendment does not purport to be complete and is qualified in
its entirety by reference to the Amendment, which is filed as Exhibit 10.1 to
this report and incorporated herein by reference.
Wachovia
Loan Transaction
Amendment
No. 2 to Letter Re: Amendment and Forbearance Agreement dated March 27, 2009 by
and among Wachovia Capital Finance Corporation (Western), Kinergy Marketing LLC
and Pacific Ethanol Inc.
Amendment
No. 1 to Letter Re: Amendment and Forbearance Agreement dated February 26, 2009
by and among Pacific Ethanol, Inc., Kinergy Marketing LLC and Wachovia Capital
Finance Corporation (Western)
Amendment
and Forbearance Agreement dated February 13, 2009 by and among Pacific Ethanol,
Inc., Kinergy Marketing LLC and Wachovia Capital Finance Corporation
(Western)
Loan
and Security Agreement dated July 28, 2008 by and among Kinergy Marketing
LLC, the parties thereto from time to time as the Lenders, Wachovia Capital
Finance Corporation (Western) and Wachovia Bank, National
Association
Guarantee
dated July 28, 2008 by Pacific Ethanol, Inc. in favor of Wachovia Capital
Finance Corporation (Western)
A
description of Amendment No. 2 to Letter Re: Amendment and Forbearance Agreement
is set forth in the Company’s Current Report on Form 8-K for March 27, 2009
filed with the Securities and Exchange Commission on April 2, 2009 and such
description is incorporated herein by reference.
A
description of Amendment No. 1 to Letter Re: Amendment and Forbearance Agreement
is set forth in the Company’s Current Report on Form 8-K for February 26, 2009
filed with the Securities and Exchange Commission on March 4, 2009 and such
description is incorporated herein by reference.
A
description of the Amendment and Forbearance Agreement is set forth in the
Company’s Current Report on Form 8-K for February 13, 2009 filed with the
Securities and Exchange Commission on February 20, 2009 and such description is
incorporated herein by reference.
Descriptions
of the Loan and Security Agreement and the Guarantee are set forth in the
Company’s Current Report on Form 8-K for July 28, 2008 filed with the Securities
and Exchange Commission on August 1, 2008 and such descriptions are incorporated
herein by this reference.
Item
1.03.
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Bankruptcy
or Receivership.
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On May
17, 2009, five indirect wholly-owned subsidiaries of the Company, namely,
Pacific Ethanol Holding Co. LLC, Pacific Ethanol Madera LLC, Pacific Ethanol
Columbia, LLC, Pacific Ethanol Stockton, LLC and Pacific Ethanol Magic Valley,
LLC (the “Debtors”) each commenced a case by filing a voluntary petition for
relief (the “Bankruptcy Filing”) under chapter 11 of Title 11 of the United
States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for
the District of Delaware (the “Bankruptcy Court”). A copy of the
press release announcing the filing is attached as Exhibit 99.1 to this
report and incorporated herein by reference.
Neither
the Company, nor any of its direct or indirect subsidiaries other than the
Debtors, filed petitions for relief under the Bankruptcy Code.
The
Debtors’ will seek joint administration by the Bankruptcy Court of their chapter
11 cases (the “Cases”). The Cases are: In re: Pacific
Ethanol Holding Co. LLC, Chapter 11 Case No. 09-11713; In re: Pacific Ethanol Stockton
LLC, Chapter 11 Case No. 09-11714; In re: Pacific Ethanol
Columbia, LLC, Chapter 11 Case No. 09-11715; In re: Pacific Ethanol Madera
LLC, Chapter 11 Case No. 09-11716; and In re: Pacific Ethanol Magic
Valley, LLC, Chapter 11 Case No. 09-11717. The Debtors plan to
continue to operate their businesses as “debtors-in-possession” under
jurisdiction of the Bankruptcy Court and in accordance with applicable
provisions of the Bankruptcy Code and order of the Bankruptcy
Court.
As a
result of the Bankruptcy Filing, the Debtors will be required to file
periodically various documents with, and provide certain information to, the
Bankruptcy Court, including statements of financial affairs, schedules of assets
and liabilities, monthly operating reports and other financial
information. Such materials will be prepared according to
requirements of federal bankruptcy law and may in some cases present information
on an unconsolidated basis. While they would accurately provide
then-current information required under federal bankruptcy law, such materials
will contain information that may be unconsolidated and will generally be
unaudited and prepared in a format different from that used in the Company’s
consolidated financial statements filed under the federal securities
laws. Accordingly, the Company believes that the substance and format
of such materials do not allow meaningful comparison with its regular
publicly-disclosed consolidated financial statements. Moreover, the
materials filed with the Bankruptcy Court are not prepared for the purpose of
providing a basis for an investment decision relating to the Company’s or other
Debtors’ stock or debt or for comparison with other financial information filed
with the Securities and Exchange Commission.
Most of
the Debtors’ filings with the Bankruptcy Court are available to the public at
the offices of the Clerk of the Bankruptcy Court or the Bankruptcy Court’s web
site (http://www.deb.uscourts.gov) or may be obtained through private document
retrieval services. The Company undertakes no obligation to make any
further public announcement with respect to the documents filed with the
Bankruptcy Court or any matters referred to therein. Information
contained on, or that can be accessed through, the Bankruptcy Court’s web site
is not part of this report.
Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
sheet Arrangement of a Registrant.
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Certain
of the Debtors’ existing lenders (the “DIP Lenders”) under that certain Credit
Agreement dated as of February 27, 2007 by and among the Debtors and WestLB AG,
New York Branch, Amarillo National Bank, the senior secured lenders identified
therein and the other parties thereto (the “Credit Agreement”) have agreed in
principle to a Term Sheet (the “DIP Term Sheet”) for a $20 million
Debtor-in-Possession Credit Facility with the Debtors. The DIP Term
Sheet is filed herewith as Exhibit 10.2 and is incorporated herein by
reference. The DIP Term Sheet provides, subject to approval by the
Bankruptcy Court and certain other conditions described below and in the DIP
Term Sheet, for a first priority debtor-in-possession financing (the “DIP
Facility”) composed of a term loan facility made available to the Debtors in a
maximum aggregate principal amount of up to $20 million. Proceeds of
the DIP Facility will be used, among other things, to fund the working capital
and general corporate needs of the Debtors and the costs of the chapter 11 Cases
in accordance with an approved budget.
The
Debtors and the DIP Lenders have negotiated a proposed DIP Credit
Agreement. The DIP Facility is subject to the entry of an order by
the Bankruptcy Court approving the DIP Facility on terms and conditions
acceptable to the DIP Lenders in their sole discretion. In addition,
the DIP Facility is subject to the satisfaction of a number of material
conditions precedent, including those set forth in the DIP Term Sheet filed
herewith and incorporated herein by reference.
Item
2.04.
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Triggering
Events that Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet
Arrangement.
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The
disclosure under Item 1.03 of this report is incorporated herein by
reference.
The
Bankruptcy Filing constituted an event of default under the Credit
Agreement. Obligations of the Debtors in respect of the Credit
Agreement are secured by substantially all of the Debtors’ assets. Under the
terms of the Credit Agreement, upon the Bankruptcy Filing, the outstanding
principal amount of, and accrued interest on, the amounts owed under the Credit
Agreement became immediately due and payable. As of May 18, 2009, the
aggregate principal amount outstanding under the Credit Agreement was
approximately $247 million, plus accrued and unpaid interest, fees and
other costs.
Item
9.01.
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Financial
Statements and Exhibits.
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Exhibit
No.
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Description
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10.1
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Amendment
and Waiver Agreement dated May 17, 2009 by and between Wachovia Capital
Finance Corporation (Western) and Kinergy Marketing LLC
(*)
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10.2
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Debtor
in Possession Credit Facility Term Sheet (*)
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99.1
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Press
Release dated May 18, 2009 (*)
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_______________
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*
Filed herewith
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SIGNATURES
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.
Date: May
18, 2009
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PACIFIC
ETHANOL, INC.
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By:
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/s/ CHRISTOPHER W. WRIGHT
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Christopher
W. Wright,
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Vice
President, General Counsel &
Secretary
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EXHIBITS
FILED WITH THIS REPORT
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Number
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Description
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10.1
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Amendment
and Waiver Agreement dated May 17, 2009 by and between Wachovia Capital
Finance Corporation (Western) and Kinergy Marketing LLC
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10.2
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Debtor
in Possession Credit Facility Term Sheet
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99.1
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Press
Release dated May 18, 2009
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7