In a sign that biofuel maker KiOR Inc.’s money troubles aren’t letting up, the start-up company will make a $250,000 forbearance payment to the Mississippi Development Authority in exchange for 120 days to get current on its nearly $70 million debt to the MDA.
KiOR defaulted on a $1.87 million payment that was scheduled for June 30. The $250,000 fee is a separate payment to the state that does not reduce the company’s liability to the state under the parties’ agreement, the MDA said in a press statement late Thursday. The agency said it granted the forbearance on advice of outside counsel retained with the help of Attorney General Jim Hood.
The state would be the first creditor in line and could seize the company’s plant if a default occurs on the remainder of the loan, the MDA says.
The Pasadena, Texas-based KiOR has faced problems reliably producing the amount of oil that the plant was designed to make.
KiOR said in May it was idling the $225 million Columbus plant, meant to make oil from wood chips and needed a significant cash infusion for further testing on the commercial applications for its product. More research and technological improvements are needed, it said.
The plant stopped production in December, when it had about 100 employees.
By mid June, it laid off 18 workers and said it anticipated cutting more of the remaining 55 workers.
The Associated Press reported in May that KiOR reached a deal to stave off an impending debt default, borrowing $25 million from an entity controlled by Vinod Khosla, who also owns 64 percent of the company’s stock. But that’s only enough to sustain operations through August, the AP reported.
Stock filings indicate KiOR has drawn down $10 million so far, AP reported on June 19. Khosla is supposed to agree that KiOR has met “certain performance milestones” before each installment.
The company owes nearly $280 million, including $69.4 million to the state of Mississippi.
The state loaned KiOR $75 million to help its startup, one of a number of investments made by Gov. Haley Barbour’s administration in alternative-energy companies. Until the June 30 default, KiOR had been making scheduled loan payments.
As recently as late September, KiOR portrayed its operations as successful and said it was poised to double its biofuels production in Columbus.
The increased capacity would entail building a second cellulosic fuels facility in Columbus at a cost of $225 million, the Associated Press reported.