Nova Secures $41 Million of Senior Secured Debt Financing for Biodiesel Plant
Washington, D.C., January 4, 2008 – LAWFUEL – Law Firm Newswire Service – Baker & McKenzie LLP announced today that it represented Nova Biosource Fuels, Inc. (AMEX: NBF) in connection with the debt financing of its 60 million gallon-per-year biodiesel refinery currently under construction in Seneca, Illinois. Nova’s biodiesel facilities utilize Nova’s proprietary, patented process technology that permits the production of fuel-grade biodiesel from a broad range of lower-cost feedstocks. The Seneca project is one of three currently under development and construction in various stages by Nova and the first such project to be project-financed.
Nova entered into the $41 million senior secured debt facilities, which include a $5 million working capital facility, on December 26, 2007. WestLB AG, New York Branch, acted as sole arranger, bookrunner and administrative agent on this financing. This transaction marks the first project financing for a publicly-traded biodiesel production company, the first project financing for a biodiesel refinery designed and built by the sponsor and the first involving a biodiesel refinery designed to use high free fatty acid feedstocks, which would free the refinery from dependence on high priced soy, canola and palm oils.
Biodiesel has been a distant second to ethanol as an alternative fuel in terms of gallons produced in the United States, but the recently enacted Energy Independence and Security Act of 2007 mandates the usage of 500 million gallons of biodiesel per year by 2009 and more than 1 billion gallons by 2012. As a result, production is expected to increase dramatically in the coming years. Unlike ethanol, in most uses, so long as it meets the standards of ASTM D6751, biodiesel may be mixed with, or used in replacement of, petroleum-derived diesel without any engine modifications. Most U.S. producers of biodiesel rely on low free fatty acid feedstocks, such as soy, canola and palm oils, but Nova produces ASTM D6751 quality biodiesel from lower-cost, high free fatty acid feedstocks, such as inedible beef tallow, poultry fat, recycled yellow greases and other fats, oils and greases that are byproducts of the food processing, rendering and manufacturing industries. Use of these feedstocks could reduce the pressure of using food supplies as a fuel source and the impact that the increased cultivation of soy beans and palm trees would have on arable land and tropical rainforests.
Kenneth T. Hern, Chairman and Chief Executive Officer of Nova, stated: “We are very pleased to have concluded this financing transaction with WestLB on behalf of our stockholders and industry partners. We believe that having a leading lender to the biofuels industry back one of our projects validates our business strategy and proprietary technology for using low-cost feedstocks to consistently produce high-quality biodiesel, and we look forward to working with WestLB and other lenders to finance our future projects. The advice, counsel, guidance and legal representation provided by the Baker & McKenzie team were invaluable in structuring and completing this financing.”
“We are pleased to have worked with the Nova team in arranging the debt financing for the Seneca biodiesel refinery,” said Chris Groobey, a Project Finance Partner in Baker & McKenzie’s Washington, D.C. office. “The successful financing of this project proves that, even in spite of the current challenging credit markets, the financial community is willing to support new biofuels technologies that result in higher margins for the producer and high-quality fuels for customers.”
Roger Bivans, a Corporate and Securities Partner in Baker & McKenzie’s Dallas office, added “Baker & McKenzie has been pleased to represent Nova since its formation, including with respect to its listing on the American Stock Exchange, its equity and convertible debt securities offerings, its corporate governance matters and the acquisition of its ten million gallon per year biodiesel refinery in Clinton County, Iowa. We believe the Seneca financing solidifies Nova’s position as one of the leading biodiesel companies in the United States.”
Baker & McKenzie Partner Chris Groobey led the transaction for Nova. Working with him were project finance associates Nathan Read and Michael Egan from Washington D.C. and project finance associate Nathan Walker and real estate associate Chris Kopecky from Chicago. Partner Roger Bivans and associates Kevin Maher and Raj Choudhary, both from Baker & McKenzie’s Dallas office, represented Nova with respect to commercial and corporate and securities matters.
The Nova transaction continues another strong year of successful biofuels transactions for Baker & McKenzie. In the biodiesel arena, the Firm represented Société Générale as the arranger of approximately $115 million of debt financing to Imperium Renewables, Inc., for its 100 million gallon per year biodiesel production facility in Grays Harbor, Washington. With respect to ethanol, in December 2007, the Firm represented First United Ethanol, LLC, in connection with $115 million of debt financing for its 100 million gallon ethanol production facility in Camilla, Georgia. In April 2007, the Firm represented the private equity fund New Energy Capital in connection with the sale of an ethanol production facility in Indiana to Babcock & Brown. The Firm has numerous other financings of biofuels projects in progress.
