COLUMBUS — Biofuel maker KiOR Inc. has filed for bankruptcy, although its Mississippi subsidiary has not, preserving the chance that its Columbus plant could be sold quickly.
The company, based in Pasadena, Texas, filed for Chapter 11 bankruptcy protection late Sunday in U.S. Bankruptcy Court in Delaware, where it’s incorporated.
KiOR defaulted on a loan from Mississippi last week after failing to make a $1.8 million debt payment. The state says KiOR Columbus LLC, owned by KiOR, owes $78.6 million.
Mississippi Gov. Phil Bryant said he was working with Attorney General Jim Hood and state Auditor Stacey Pickering to recover the money.
“We are going to exercise every legal action possible to recover the money owed to the Mississippi taxpayers,” Bryant said in a statement to The Associated Press.
The company borrowed $75 million from Mississippi to build a refinery in Columbus meant to make fuel from wood chips. But the $230 million plant never worked as designed and KiOR laid off almost all of its workers. The state is now trying to find a buyer for the complex on the Tombigbee River just west of downtown Columbus. It’s possible that the only money Mississippi will recover will come from the sale of the plant.
It’s the second in a series of alternative energy businesses that went bust after being loaned money by Mississippi under Gov. Haley Barbour. Solar panel maker Twin Creeks went out of business in Senatobia after receiving $27.7 million in aid but creating few jobs.
KiOR estimates its assets are worth between $10 million and $50 million, while its debts are worth between $100 million and $500 million. The company said Friday that because of its default to Mississippi it now owed $312 million immediately to all its lenders.
Financier Vinod Khosla, whose companies are KiOR’s largest creditors and shareholders, proposes that a new company buy KiOR’s assets by converting $16 million of debt into equity, if no higher bidder steps forward. The company said investment bank Guggenheim Partners had solicited 165 potential buyers, and that Khosla’s bid is the only one so far.
The company said it will “refocus on research and development,” proposing a bankruptcy court auction on Dec. 17, with a sale closing by Jan. 15. Khosla’s companies would also loan KiOR enough money to keep going during bankruptcy proceedings.
Khosla Ventures — the financier’s Menlo Park, California, investment firm — controls 88.5 percent of KiOR stock. He and fellow investors including the Canadian province of Alberta have loaned the company more than $200 million. Other large shareholders besides Khosla and Alberta include Microsoft co-founder Bill Gates, former KiOR CEO Fred Cannon and two hedge funds. KiOR said shareholders will lose all their money.
Mississippi has first claim to the assets of KiOR Columbus. But the state is an unsecured creditor of KiOR Inc., making it questionable if it will recover anything from the parent company. It’s not clear what the Columbus plant is worth. At the end of last year, KiOR wrote down the value of the facility by $185 million, saying that because of the operations problems, accounting rules required it be listed as only worth salvage value. KiOR said that as of June 30, its property, plant and equipment was worth $50.8 million.
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