Pacific Ethanol Stock Offering to Cover Bankruptcy Debt

The recent economic downturn has forced many businesses to make tough decisions. Many turned to business bankruptcy to keep their companies afloat. Pacific Ethanol Inc. was among those companies which chose a business reorganization in bankruptcy court as a way to get through a tough time.

Pacific filed for bankruptcy in 2009 and is in the process of rebuilding. It recently completed another stock offering, bringing in $11 million for the company. This offering was the second by Pacific since July. Both of these offerings sold out in less than a week.

Pacific said that the majority of the proceeds will be used to pay off close to $10 million in loans that the company used to buy back shares in four of its production plants. The additional $1 million will be used for general operating costs. The production plants that Pacific repurchased were acquired by lenders after Pacific filed for bankruptcy. It is common in bankruptcy for assets to be sold to pay off some of the debts the filer had.

Business bankruptcy allows a company to stop creditors from pursuing collection actions and allows the company to restructure debt in order to emerge from bankruptcy a stronger and more financially stable company. Some debt may be discharged but most of it is not, which means that there must a plan in place to begin repayment once the company is out of bankruptcy.

The current issue Pacific is facing is de-listing by Nasdaq. This occurs when a stock's price dips below a certain price for more than 30 days Pacific has struggled to avoid de-listing for the past several years.

Source: Sacramento Bee, "Pacific Ethanol stock offering brings $11 million," Claudia Buck, Sep. 27, 2012

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