TD Banknorth and WestLB Arrange $205 Million of Senior Debt Financing for First Ethanol Plant in Pennsylvania and First to be Financed with a Long-Term Ethanol Offtake Contract
Washington, D.C., February 15, 2008 – LAWFUEL – Baker & McKenzie LLP announced today that it represented TD Banknorth, N.A., and WestLB AG, New York Branch, as joint lead arrangers, in connection with the debt financing of a 100 million gallon-per-year corn ethanol biorefinery under construction in Clearfield, Pennsylvania. The project is being developed by BioEnergy International, LLC and is the first ethanol project to be constructed in Pennsylvania.
WestLB and TD Banknorth arranged a total of $215 million of senior secured debt facilities, including three tranches of senior construction and term loans, a working capital facility and tax exempt bond financing placed by Stern Brothers & Co. The project also benefits from extensive support by the Commonwealth of Pennsylvania in the form of grants and subordinated loans. The financing closed on February 6, 2008.
In addition to being the first ethanol plant in Pennsylvania, the transaction is unique because of the high degree of leverage achieved in the financing. This was made possible by the multi-tranche, first-lien second-lien structure of the financing and by a long-term ethanol purchase agreement that the project has entered into with Getty Petroleum Marketing Inc. The ethanol purchase agreement permits greater-than-normal leverage on the project because it insulates the plant from losses caused by adverse changes in the prices of corn, natural gas, ethanol and corn by-products.
“The successful financing of the BioEnergy biorefinery project, during a period of tight credit markets, was made possible by the use of innovative debt structuring techniques and the dedication of many financial professionals at TD Banknorth and WestLB,” said Jerry Peters, Senior Vice President and Head of Project Finance at TD Banknorth, N.A.
“The BioEnergy transaction demonstrates that debt capital is still available for well-developed projects such as this one, especially when commodity price risks are minimized via a contractual offtake arrangement and there is strong support from the host community. We are pleased to have closed this financing for the BioEnergy team and their investors,” said Michael Pantelogianis, a Director in WestLB’s Global Energy Group.
“We are pleased to have worked with our long-time client TD Banknorth, and our new client WestLB, on this important transaction for the ethanol industry. The BioEnergy development team did a strong job of creating a project that minimized risks for all involved, allowing the banks to structure and arrange an unprecedented financing package that maximizes returns to both lenders and equity investors,” said Chris Groobey, the lead Baker & McKenzie partner on the transaction. Groobey added, “The successful closing of this financing structured around a long-term ethanol purchase agreement that takes into account commodity costs and significant grants and subordinated loans from the Commonwealth of Pennsylvania sets a new paradigm for the financing of ethanol projects in the future.”
Chris Groobey of Baker & McKenzie’s Washington DC office led the transaction for TD Banknorth and WestLB. Working with him were project finance partner Ata Dinlenc and project finance associate Matthew Sandiford from New York, project finance associates Nathan Read and Michael Egan from Washington, real estate associate Chris Kopecky from Chicago, and environmental partner Rick Saines and environmental associate Sasha Reyes from Chicago.
The BioEnergy transaction builds on a strong previous year of biofuels transactions for Baker & McKenzie. In December 2007, the Firm represented Nova Biosource Fuels in connection with the $41 million debt financing of a 60 million gallon biodiesel refinery in Seneca, Illinois. In November 2007, the Firm represented First United Ethanol, LLC, in connection with the $115 million debt financing of a 100 million gallon ethanol production facility in Camilla, Georgia.
In September 2007, 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. In April 2007, the Firm represented 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.