Green Plains Strikes BlackRock Deal, Pledges Majority of Ethanol Plants

In Short

• Green Plains pledges nine ethanol plants to BlackRock to extend repayment of nearly $128 million in debt.
• Company shifts focus to carbon capture, aiming to profit from revised 45Z biofuel credit incentives.
• Debt extension to September 2026 comes with higher interest rates, fees, and stock warrants for BlackRock.

Green Plains Inc., a biofuels maker based in Omaha, Nebraska, has made a deal with BlackRock Inc. to extend the deadline for repaying nearly $128 million in debt.

To secure this extension, the company has pledged nine of its ten ethanol plants as collateral. This means that if Green Plains cannot pay back the money, BlackRock funds could take ownership of these plants.

The company has been struggling for years due to an oversupply of ethanol in the market and reduced fuel demand caused by the rise of electric vehicles.

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Attempts to diversify its business — such as producing fish feed and clean sugar — have not been successful. Now, Green Plains is betting on a new carbon-capture pipeline project to turn its business around.

This pipeline, operated by Tallgrass Energy LP, will connect to a third of Green Plains’ plants and allow it to produce a lower-carbon ethanol. This could qualify the company for tax credits and incentives under the revised 45Z biofuel credit rules.

The extended repayment date is now September 2026. When the debt was first issued in 2021, only two plants were used as collateral. That number has now grown to nine plants, with eight operating and one idle.

The only plant not included is the Shenandoah facility in Iowa. The new terms also come with a 2.5% fee, higher interest rates (up from 11.75% by an extra 0.5% plus an additional 0.5% every quarter until full repayment), and the issuance of 3.25 million stock warrants to BlackRock at 1 cent per share, giving it the right to acquire an extra 5% ownership in the company.

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This type of debt is called mezzanine financing, which is high-risk and high-interest. In case of bankruptcy, mezzanine debt is repaid only after senior loans are settled. While this deal gives Green Plains more time to work on its turnaround, it also puts most of its major assets on the line if it fails to recover financially.

Ends/

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Source: Bloomberg