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HLBE denies bankruptcy rumors

HERON LAKE -- Despite rumors that may be circulating, Heron Lake BioEnergy has not filed for bankruptcy and has no intention of doing so, according to HLBE General Manager and board president Bob Ferguson. Recently, the company signed an agreemen...

HERON LAKE -- Despite rumors that may be circulating, Heron Lake BioEnergy has not filed for bankruptcy and has no intention of doing so, according to HLBE General Manager and board president Bob Ferguson. Recently, the company signed an agreement with its lender to extend the maturity date on a revolving line of credit, which was due March 1.

According to a report filed Monday with the U.S. Securities Exchange and Commission (SEC), AgStar Financial Services entered into an agreement with HLBE, extending the maturity of the date for up to 60 days, provided that HLBE accomplish certain conditions prior to May 1.

In exchange for the extension, HLBE paid the amount equal to 50 percent of the deferred interest, the report states.

The report, known as a Form 8-K, is used to notify investors of unscheduled events important to shareholders.

A Form 10-K is an annual report required by the SEC that gives a comprehensive summary of a public company's performance.

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HLBE's 10-K, filed with the SEC in January, states a master loan agreement with AgStar includes three forms of debt as of Oct. 31, 2010; a term note from 2007 in the original principal amount of $59.6 million; a revolving term note from 2009 in the original amount of $5 million; and the line of credit that was renewed in July 2010.

The maturity date was Dec. 31, 2010, but was extended to March and has now been extended to May.

"What we filed yesterday is basically an extension of our loans," explained Ferguson. "The 10-K is the verbiage that equates to the hypothetic -- worst case-scenarios. All the bad things, the worst things that could exist."

In a recent post on Minnesota Public Radio's (MPR) website, HLBE was said to be in "financial trouble," with a future that was described as dismal, but Ferguson said the reality is that the loans were extended before the March 1 deadlines in an attempt to raise additional working capital for the company.

The quotes for the MPR post, which stated AgStar may accelerate the indebtedness and seize assets, forcing HLBE to sell assets or submit to foreclosure, were taken from the section of the 10-K report that lays out all risk factors -- anything that could possibly go wrong, Ferguson indicated.

HLBE Chief Financial Officer Luke Schneider said the quarterly report for the company will be available by the end of next week.

"Last year we showed a profit of $1.7 million," Schneider stated. "(MPR) made it sound like that is minimal, but when the quarter is filed next week, people can take a look."

By the end of fiscal year 2010, HLBE had sold more than 53 million gallons of ethanol, approximately 6 million more than the previous year.

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"We believe that the number of gallons of ethanol sold was affected by the plant's productivity that was impacted by scheduled and unscheduled downtime during the fiscal year 2009," the annual report states.

The 10-K report states HLBE believes the competition on the ethanol marker will increase as plants recently sold through bankruptcy proceedings return to production, but that the consumption of ethanol has been outpacing production for the past few years, leading to increased imports in the United States.

This week's 8-K filing, Ferguson said, is the latest information that goes out to HLBE's shareholders, and to make any other public statement involving the solvency of the company would be unfair to them.

"But this company has no intention of filing bankruptcy," he reiterated.

Schneider agreed, stating the MPR article may have led to "misunderstandings and misinformation," which could account for some rumors.

"But bankruptcy? I don't know where they'd come up with that," he said.

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