VeraSun Energy issues 20 million shares to shore up capital; Aventine says will issue debt, shares or delay expansion, as liquidity crisis hits biofuels

In Illinois, Aventine Renewable Energy (AVR) said that it would issue new debt and shares, or delay expansion plans, to rebuild its capital base, and VeraSun Energy (VSE) issued 20 million new shares to attract new capital, as first-generation ethanol producers share prices plummeted yesterday as a cash crisis appeared imminent for two of the nation’s major ethanol producers and marketers. VeraSun Energy shares dropped 72.99 percent yesterday to an all-time low of $1.48, and Aventine sank 22 percent to $3.94.

Raymond James analyst Pavel Molchanov told Reuters “It’s not ethanol as an industry that’s in danger here. The news from VeraSun just underscores how hedging can help companies manage risk but it can also cause damage.” VeraSun said that it will lose up to $103 million in the third quarter after locking in for a $5.70 corn price for its third quarter needs in early summer.

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