US Biofuels Maker Pledges Plants Against Debt Held by BlackRock
(Bloomberg) -- Troubled biofuels maker Green Plains Inc. has pledged the bulk of its ethanol plants as collateral to funds managed by BlackRock Inc. in exchange for more time to repay nearly $128 million in debt.
The Omaha, Nebraska-based company extended the payment deadline of its so-called junior mezzanine notes, held by BlackRock funds, for a second time. The delay has come at a price: nine of its 10 ethanol plants are now pledged against the debt, according to regulatory filings.
The risky deal marks the latest effort by Green Plains, once a bellwether of the US ethanol industry, to stay afloat as it pursues a turnaround. But the agreement could end up giving BlackRock funds possession of the company’s assets in case of a default.
Green Plains has struggled for years due to an oversupply of ethanol and pressure from electric vehicles that are curbing overall fuel consumption. Many of the company’s bets to diversify away from ethanol — investing in everything from fish feed to clean sugar — never really paid off.
The indebted ethanol maker is now pinning its future on a new carbon-capture pipeline that will allow it to profit from multi-trillion-dollar tax legislation signed into law by President Donald Trump earlier this year.
“Obtaining a short-term extension was the best tactic to our strategy as we believe executing carbon capture monetization will provide better options for a longer term solution,” Michelle Mapes, who is acting as interim chief executive officer, said in an earnings call on Monday. “We are maintaining our plan to repay these notes.”
BlackRock declined to comment. A Green Plains spokesperson said the company remains “focused on creating long-term value for shareholders.”
Green Plains intends to link a third of its plants to Tallgrass Energy LP’s Trailblazer carbon pipeline, scheduled to start in the fourth quarter. That will allow it to sell a greener version of corn-based ethanol and profit from new rules that include a revision of a Biden-era biofuel credit, called 45Z, rewarding fuel makers with the smallest carbon footprint.
The extension of the payment deadline to September 2026 meant that Green Plains had to include a ninth plant as guarantee to back the notes. When the debt was first issued in 2021, only two plants were given as collateral.
Eight of the plants pledged against the loan are currently in operations, while one is idled. The only facility excluded from the agreement is Shenandoah, in Iowa.
The deal comes with a 2.5% fee, higher interest payments and additional stock warrants. The notes’ 11.75% interest rate was raised by 0.5%, with an additional 0.5 percentage point added each quarter until full repayment.
Green Plains also agreed to issue 3.25 million stock warrants at a strike price of 1 cent per share to BlackRock funds, giving the asset manager the option to grab an extra 5% stake in the company.
Mezzanine loans, a blend of equity and debt, is a type of high-risk debt that ranks behind senior loans for repayment in case of default and pay higher yields to compensate.
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