Pa plant files bankruptcy, hopes to sell within 6 months

By Holly Jessen | July 21, 2011

Bionol Clearfield LLC won’t be restarting this fall after all—at least not under the current ownership.

On July 20, the 110 MMgy plant and two affiliated entities, Bionol Clearfield Holdco LLC and BioEnergy Holding LLC, filed for Chapter 7 bankruptcy protection. All three companies are based in Clearfield, Pa. Chapter 7 bankruptcies provide for liquidation, or the sale of a debtor’s nonexempt property, and distributing the proceeds to its creditors, according to the government website for U.S. Courts. 

The plan is that the plant will remain in hot idle status, said Rob Carringer, interim CEO of Bionol. Ideally, the plant will be sold as a functioning ethanol facility in the next four to six months. However, the company said in a press release the outcome will ultimately depend on the business judgment of the bankruptcy trustee and is subject to court approval.

Bionol’s employees are still working at the plant. The lenders feel that a plant with a complete management and production team on staff will fetch a higher price. “The lenders want all the employees there,” Carringer said. “They’ve provided enough funding to the company to enable the company to continue to pay all the employees and keep all the employees here, even though we aren’t making alcohol, while we run through a sale process.” Still, this decision could be reversed by the trustee.

Just more than a week ago Carringer told EPM that the company was idling until the market improved. Bionol was in confidential negotiations with its lenders, trying to restructure its loan at the time. “Ultimately the lenders decided that they would prefer that we sell the business,” he said after the plant filed for bankruptcy. “When we looked at the alternative ways to sell the business, bankruptcy was the preferred option.”

The source of Bionol’s financial troubles is a contract dispute with Getty Petroleum Marketing Inc., Carringer said. Bionol had a five-year contract with Getty to purchase all its ethanol at a price based on a formula that accommodated for the ups and downs in corn prices. Two months into the contract, Bionol said Getty breached it by paying less than the contract price. Getty officially filed a Demand for Arbitration before the American Arbitration Association against Bionol on June 29, and the case is ongoing.

In the meantime, Bionol has been selling its ethanol on the open market for a lesser price than it expected to receive from Getty. Although Carringer declined to name the exact additional amount that would have then been paid under the contract, he did say it was approaching nine figures. “That default is what basically led us to the point we didn’t have enough liquidly to continue operate and pay back the loan,” he said. “If we would have had that, we never would have been in the position we are in.”

Bionol notified the Borough of Clearfield before filing for bankruptcy, Borough Operations Manager Leslie Stott told EPM. Although there some employment opportunities in the area, the possibility of losing jobs at the ethanol plant is a concern. Some of Clearfield’s volunteer firefighters work at the plant, she added. “Optimistically, they hope that the plant can be sold as an operating plant,” he said. “At this point that’s the only thing that the Borough can hold on to, is the optimism that someone might come in and purchase it and be able to begin production again.”

According to bankruptcy documents, Bionol has between 100 and 200 debtors. The company owes $9.3 million to its largest creditor.