Aventine Renewable Energy Holdings (fka AVRW)

[timhyma]

some math from the yahoo board:

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_A/threadview?m=tm&bn=70607&tid=2485&mid=2496&tof=2&rt=2&frt=1&off=1

Summary of the document

New ARE Holdings will have 8,550,000 equity shares plus 450,000 warrants.

The prepetition noteholders will be given 80% of the equity (6,840,000 shares)

The prepetition noteholders will be offered $105,000,000 5-year notes at 13% per annum plus 20% of the equity (1,710,000 shares). $1000 equity units (+16.8 shares) can be purchased at $952.38.

It seems as if $342,000,000 in debt to the prepetition noteholders is being converted to equity. When accounting for the warrants (450,000 at $40.94 per warrant = $18 mil); there will be 9,000,000 shares exchanged for $360 mil

I believe that their current cash holdings will be used to payoff other prepetition debt, and the additional $105,000,000 raised from the new notes will be used to complete Mt Vernon and Aurora West.

The emerging company after completion of the Mt Vernon and Aurora West projects with have 440 million gallons/year ethanol producing capacity. Long-term debt will be $105,000,000 at 13% annual interest ($13,650,000 per year interest payment).
Assuming current ethanol/corn prices, expenses, etc. I would estimate between $0.50 to $1.00 cash flow per gallon ethanol produced ($220,000,000 - 440,000,000/year)
This would give cash flow of at least $200,000,000 after interest-- with 9,000,000 shares outstanding-- about $22/share free cash flow.

100 shares of AVRNQ will get 1 warrant of ARE holdings. For simplicity's sake, if we value new shares at $100 per share, and the strike for each warrant is $40.94, the value of the warrant is $59.06. With a conversion of 100:1; this values each current share of AVRNQ at $0.59/share. This is not too far off from closing price on Friday.

The upside is that at current commodity prices, cash generated could easily be double this estimate-- if new ARE is $200/share, warrants are worth $159-- valuing AVRNQ at $1.59/share.

Any questions?