Loeb Buys 19.3% of BioFuel Energy Corp.; To Partner With Einhorn

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In November last year, lenders to BioFuel Energy Corp. (NASDAQ:BIOF) exercised their rights under the existing senior secured credit facility acquired the companies ethanol plants and completed their sale to an entity called Green Plains Inc (NASDAQ:GPRE). In return they extinguished the entire outstanding under the said credit facility which totalled $ 177 million including principal and interest owed to them by BioFuel Energy.

That marked the end of the company’s ethanol business. The company was left with two assets of any significance: about $10-$11 million of unrestricted cash on hand and federal net operating losses carry forwards of about $250 million.

In the first week of November, 2013, the stock touched a low of $1.13. It languished at sub-$2.00 levels until March 2014.

According to a July 18, 2014 filing, Daniel S Loeb (of Third Point LLC fame) had a beneficial interest of 19.3% in BioFuel Energy Corp.(NASDAQ:BIOF). Loeb has been a long-standing holder in BioFuel Energy Corp. (NASDAQ:BIOF).

BioFuel Energy Corp. (BIOF) in transformation

The stock jumped out of its somnolence in March 2014 (see green ellipse in the above chart) when it was announced that BioFuel Energy Corp. (NASDAQ:BIOF) would purchase an equity interest in certain real estate assets owned by David Einhorn’s Greenlight Capital and James Brickman (along with their associates, trusts and family members) for an aggregate sum of $ 275 million, to be paid in cash and stock. The company proposed to assume $150 million in debt financing from Greenlight and to raise $70 million through a rights offer.

Last week the stock was again in the limelight on news that David Einhorn’s Greenlight Capital intended to fully participate in an upcoming rights offering and that Einhorn’s shareholding stake in the company had jumped from 26.24% as of March to 35.4%.

Loeb investing alongside Einhorn

Loeb’s filing included a copy of his own commitment agreement in respect of the rights offer with the following terms:

In connection with the Rights Offering, BioFuel Energy Corp. (NASDAQ:BIOF) shall distribute at no charge to each of the holders of Common Stock on the record date for the Rights Offering  rights to purchase shares of Common Stock, at a per share purchase price equal to 80% of the average closing price per share of the Common Stock for the ten trading days immediately following the date of the initial filing of the Registration Statement; provided, that in no event will the per share purchase price be greater than $5.00 per share of Common Stock or less than $1.50 per share of Common Stock.

The aggregate amount of the rights offer is fixed at not less than $70 million.

Utilization of tax assets

One of the key objectives of the present restructuring appears to be to utilize the $250 million of carried forward tax losses of BioFuel Energy Corp. (NASDAQ:BIOF).

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