KiOR files for bankruptcy, plans to refocus on R&D

KiOR Inc. has filed a voluntary petition for Chapter 11 bankruptcy. The company’s idle biorefinery in Columbus, Mississippi, which is owned KiOR Columbus LLC, a wholly owned subsidiary of KiOR, is not included in the filing.

In a statement, KiOR also indicated it has accepted a bid for substantially all of its assets from affiliates of Vinod Khosla that have been providing and will continue to provide secured financing to the company. Under the bankruptcy filing, the bid is subject to higher and better offers and court approval. According to information released by KiOR, the acceptance of the bid is part of its refocus on research and development.

During the bankruptcy proceeding, KiOR has entered into an agreement for debtor-in-possession financing with an affiliate of Khosla. That agreement provides for up to $15 million in additional financing for the company to fund operations while in Chapter 11 and facilitate the sale and restructuring process.

Documents filed with the U.S. Security and Exchange commission explain that on Nov. 6, KiOR, KiOR Columbus LLC, and KFT Trust entered into an amendment to the protective advance loan and security agreement made in July. The amendment, which is effective Oct. 31, increases the aggregate commitment by the lenders (KFT Trust and other lenders who may become party to the agreement) to make protective advance loans from $15 million to $17.5 million. The amendment also modifies the maturity date so that the entire principal balance of the protective advances and all accrued but unpaid interest is due and payable on either Nov. 14 or the date on which all protective advances and other secured obligations become due and payable pursuant to the terms of the protective advance agreement, whichever is earlier. The SEC filing goes on to explain that KFT Trust made a $1.1 million protective advance to KiOR on Nov. 7. 

The SEC filing also discusses the forbearance agreement KiOR entered into with the Mississippi Development Authority in early July. KiOR noted it received a notice of default and acceleration rom the MDA on Nov. 3 notifying the company that the forbearance agreement period expired Oct. 31 and that all obligations under the loan documents are due and payable within three days of Nov. 3. As of Oct. 31, the filing indicates the aggregate amount due and payable to the MDA is more than $78.57 million.

In documents filed with the court as part of the bankruptcy procedure, Christopher Artzer, president and interim chief financial officer of KiOR, explained KiOR currently maintains corporate offices, research and development facilities and a test-scale demonstration facility in Pasadena, Texas. He also indicated KiOR currently employs approximately 71 people. As of June 30, he said KiOR entities reported assets of $58.27 million and liabilities of $261.31 million. A substantial portion of the assets relate to the Columbus plant, while about $70 million of the total indebtedness is the primary obligation of the KiOR Columbus subsidiary. According to Artzer, KiOR’s primary assets consist of machinery, equipment and intellectual property as well as its equity interest in KiOR Columbus. He also explained that KiOR’s liabilities consist primarily of several tranches of long-term secured debt held by affiliates of Alberta Investment Management Corp., the KFT Trust, VNK Management LLC and Khosla Ventures III LP. KiOR is also obligated under an unsecured guaranty of debt of KiOR Columbus incurred to the MDA in connection with the construction of the Columbus facility. As of the date of the bankruptcy petition, Artzer said KiOR owes approximately $77 to AIMCO and approximately $159 to the senior lender parties.

In the court papers, Artzer also discussed efforts related the potential sale, marketing or reorganization of the KiOR entities conducted by Guggenheim Securities LLC. In May, Guggenheim was retained to evaluate and assist KiOR in identifying and implementing various strategic options, including but not limited to, the raising of additional capital, a sale of some or all assets and/or restructuring transaction. He noted Guggenheim has contacted more than 165 potentially interested parties, with more than 20 of those parties expressing interested and executing non-disclosure agreements. As of the petition date, Artzer said that while several entities have expressed continuing interest in pursuing a transaction involving all or a portion of the assets of KiOR and/or KiOR Columbus, no entities other than the senior lending parties and Pasadena Investments LLC (the Stalking Horse Bidder) have provided a firm bid or have been willing to fund the continuing cost of operating the debtor’s business or restricting process. If KiOR’s concurrent efforts to market a disposition of its assets through section 363 are not successful, Artzer said the Stalking Horse Bidder has agreed to convert $16 million of the senior secured debt to new equity interests in the reorganized debtor, subject to the confirmation requirements under section 1129 of the bankruptcy code. “Put simply, through this chapter 11 case, [KiOR] intends to reorganize its business or sell substantially all of its assets so that it can continue its core research and development activities,” said Artzer in the court filing.

KiOR said it anticipates moving through the bankruptcy proceeding as quickly as possible, with a potential auction requested in December. In a court filing, Artzer explained KIOR has proposed setting an auction for Dec. 17, with the closing of a cash sale by Jan. 15 or the confirmation of the plan under the Stalking Horse Buyer by Feb. 12.

Documents filed with the SEC in late October indicate KiOR was delisted from the NASDAQ Stock Market LLC, effective Nov. 6.  The company received a notification of deficiency from the listings qualifications department of the NASDAQ Stock Market on Sept. 12 based on its failure to pay required fees. The trading of KiOR’s stock was suspended on Sept. 23. The form filed on Oct. 27 notes that KiOR did not appeal the decision.

KiOR was informed in May that it would be subject to delisting upon failure to regain compliance with the minimum price bid requirement of $1 per share, the minimum market value of listed securities of $50 million, and the minimum market value of publicly held shares of $15 million.