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KiOR says Miss. seeks to destroy it in court ploy

kior logoJACKSON — Bankrupt biofuel maker KiOR and controlling shareholder Vinod Khosla say the state of Mississippi is using legal tactics in an attempt to squeeze money from the company.

KiOR, based in Pasadena, Texas, fired back Thursday at the Mississippi Development Authority’s December call to convert KiOR’s case from Chapter 11 reorganization into Chapter 7 liquidation.

“The motion reflects a continuation of the MDA’s aggressive and scorched-earth litigation in this case, which apparently is intended to extort a recovery from the debtor and the Khosla-related plan support parties,” lawyers wrote in a papers filed in U.S. Bankruptcy Court in Delaware.

KiOR denies MDA’s claims that it’s manipulating its case to benefit Khosla, a billionaire venture capitalist who has invested heavily in alternative energy. A new company controlled by Khosla is in line to buy KiOR’s assets, saying it will continue KiOR’s research meant to turn wood chips into a crude oil substitute.

Khosla’s companies, in their own motion, say the case is not overly complicated and that the Khosla entities are not gaining any unfair advantage.

“In fact, they stand to lose the most — more than three times as much as the MDA,” Khosla’s lawyers wrote. “And notably, neither the Khosla parties nor any individuals associated with the Khosla parties ever sold a single share of stock, which is now worthless.”

It’s the latest turn in what’s becoming a nasty legal fight between Mississippi and KiOR, which state leaders once hailed as an economic boon for the state. MDA at first cooperated with KiOR’s attempts to reorganize in hopes of maximizing how much money the state could collect from the sale of KiOR’s defunct Columbus refinery. But MDA and KiOR have become increasingly confrontational after the company filed for bankruptcy. MDA is deposing Khosla and others, and KiOR says it and others have turned over hundreds of thousands of pages of documents to MDA lawyers.

KiOR says more than 20 buyers considered buying its assets. But Thursday it filed notice that no outsiders want to bid, meaning a new Khosla-controlled entity called Pasadena Investments will buy KiOR’s assets if the judge approves KiOR’s plan.

The company accused MDA of trying to sabotage its ongoing operations near Houston, to take the jobs of KiOR’s remaining 70 employees and to “force the abandonment of promising biofuel, alternative energy technology that can deliver real hydrocarbon transportation fuels from cellulosic feedstock.”

MDA, though, says KiOR’s attempts to refine biofuels are a failure with no immediate prospects of commercial production. The state says KiOR has no real business prospects and that the court should pull the plug.

The state says KiOR’s Mississippi subsidiary, which hasn’t declared bankruptcy, owes it $79 million. But because MDA doesn’t have a mortgage on the assets of the parent company, it could get no money back in the bankruptcy.

KiOR says it won’t pay up as a result of “MDA’s hyper-aggressive litigation scheme.”

“The debtor believes that rewarding such destructive behavior is unsound,” lawyers wrote.

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About Megan Wright

2 comments

  1. Khosla has a long history of selling biofuels snake oil to investors and then losing all their money when no commercial product materializes. His modus operandi is then to take further advantage of the investors in the endgame by sustaining the final months of simulated plant operations with small loans in exchange for tranches of senior secured stock that grant him first right to buy back the plant assets for pennies on the dollar using his other subsidiaries as fronts. He thus recovers much of his investment but leaves nothing to the other equity investors or creditors. Range Fuels is a textbook case and a perfect prototype for what he is again attempting with KiOR. It has been known since 2012 that cellulosic biofuels are thermodynamically infeasible and that the KiOR production would never materialize and that this collapse was inevitably coming ( http://wici.ca/new/resources/occasional-papers/#no.4 ). After sitting on their hands for two years, it is good to see MDA belatedly taking a hard line, though the horses have long since left the barn and the MS taxpayers have lost their $75 million to this billionaire con man.

  2. Cliff, Looks like you broke the code. I live thirty minutes from the pigeon roost that was formerly Range Fuels in Soperton, GA. Currently a Khosla holding, LanzaTech picked up the remains of Range for 5Mil at auction.

    Here is an insight into the kind of arrangments desperate people are willing to make
    when caught up in the fantasy of a story to good to be true

    “Range Fuels basically avoided having to pay property taxes by leasing the property where the plant is located from the Treutlen County Development Authority for a dollar a year. The property was nevertheless part of the collateral for the federal loan, so it was purchased outright by LanzaTech at the foreclosure sale.”

    (Read more here: http://www.macon.com/2012/02/18/1910288/shuttered-range-fuels-plant-prepares.html#storylink=cpy)

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