Subsidiary of Hawkeye Energy Holdings files for bankruptcy

Hawkeye Renewables has filed for for Chapter 11 bankruptcy reorganization and essentially turned operations over consortium of lenders, led by Credit Suisse.

The company owns and operates two Iowa ethanol plants, in Iowa Falls and Fairbank, and is a subsidiary of Hawkeye Energy Holdings, a company run by Bruce Rastetter.

Rastetter, a native of central Iowa and a long respected mover-and-shaker in Iowa political circles, co-founded Hawkeye Renewables in 2003 and serves as the chief executive of Hawkeye Energy Holdings. Rastetter has spread his wealth throughout a host of political campaigns, but predominantly has supported Republican candidates. Over the years he has been speculated to have his hand in several political ventures, ranging from a potential Republican gubernatorial bid to his personal involvement in the founding of the Iowa Future Fund, a conservative 501(c)(4) organization that morphed into the Iowa Progress Project and shares an organizational history with the American Future Fund.

Hawkeye Energy Holdings is Iowa’s largest ethanol producer and the third largest in the nation. According to Delaware court documents, the chapter 11 filing includes both Hawkeye Renewables LLC and an affiliate, Hawkeye Intermediate LLC., and lists $761 million in secured debt.

Hawkeye Growth, another subsidiary that owns and operates ethanol plants in Menlo and Shell Rock, and Hawkeye Gold, a marketing subsidiary for the ethanol and distillers grains, are not parties in the reorganization.

According to information released by Hawkeye Energy Holdings, all of its plants, including the plants operated by Hawkeye Renewables in Iowa, are buying corn and “fully expect that all corn suppliers will be paid in full under normal terms for current and future contacts.” The two plants that are a party to the reorganization “will continue to meet all sales commitments to their ethanol and distillers grains customers.”

“[T]he ethanol industry was severely affected in 2008 and 2009 by unprecedented commodity price volatility in the market for our products,” Rastetter wrote in a letter to the company’s suppliers. “In recent months, while the market for ethanol has stabilized and Renewables’ financial performance has improved, it nevertheless became clear that Renewables’ debt load was simply too high given the projected operating profile of the industry. We needed to take steps to restructure the unit’s balance sheet in order to make Renewables more competitive in the future.”

Rastetter assured suppliers that “upon the completion of its restructuring, Renewables will have one of the industry’s strongest balance sheets and very little debt.” Details of the reorganization, according to Rastetter, was pre-approved by a majority of the company’s first lien debt holders.

The two Iowa plants listed in the filing have a combined production of 225 million gallons of ethanol, and employ roughly 100 workers. Listed in court documents is $593.4 million in primary debt and $167.6 million in secondary debt.

Hawkeye Energy Holdings, which is not a direct part of the bankruptcy protection, was formed after the sale of a majority interest in Renewables to Boston-based Thomas H. Lee Partners L.P. in 2006. Rastetter no longer serves as chief executive of Heartland Pork Enterprises, having guided its acquisition by Christensen Farms in 2004. Summit Farms, a diverse farming operation located in northern Iowa, is still owned by Rastetter, but is not impacted by the chapter 11 filing.