Alto Ingredients Inc (ALTO)

[Waterloo85]

There is so much misinformation in these posts it is frustrating. Let's keep this factual, and speculating to a minimum.

1. Kinergy, credit facility of $30M is not affected. It was not named under the amendment. Profits for Kinergy cannot be fully provided to PEIX parent company under covenants provided by this facility. Including EBIDTA requirements, liquidity ratios, and profit on a quarterly and biannual basis. The covenant is very clear and detailed in the 10-K. The interest rate for this facility is very good at LIBOR + 2-3%, and that 0.5% fee ID mentioned, is only on unused amounts of the facility. This facility is used for working capital to trade ethanol. It is not long-term debt and normally has very high balances when the third party marketing business is rocking.

2. Pacific Ethanol's $15M revolving credit facility was unaffected. "The Credit Agreement Amendment maintains the borrowers' revolving credit facility at $15.0 million" and the creditors placed additional limitations on PEIX by preventing any increase in the future. They negotiated a $10M increase on their allowable level of indebtedness, but took out no additional loans.

3. PE Holdings has a revolving credit facility and a term based facility that is part of the "Plant debt". The revolving facility was reduced by $15M, and the term facility increased. This allowed them to borrow $7M for the plant. At not great terms.

The additional $7.0 million in borrowings is subject to an original issue discount of 6.25%, representing loan fees payable to the lenders, resulting in net proceeds from the additional borrowings of approximately $6.6 million.

The interest of the facility is Prime + 10%. They borrowed $7M, Paid $400K in immediate fees. Had loan proceeds of $6.6M and they pay interest on the $7M principal.

4. The shares are not to pay for the Madera opening. They took out a term loan as stated in the amendment. They stated their intention to do this in the Q4 CC. The shares are likely to pay out the debt in the quote provided by Rule_62, but they had no obligation to dilute and issue shares. They have limits on indebtedness, but not on order of payments as long as there is no dilution or additional debt. Which it seems they really wanted to do.

5. The terms of the plant debt are stated on page 35 of the 10-K. They have at most $58M in A-1 and A-2 debt that is subject to the following:

. The Plant Owners have the right at any time, and from time to time, but subject to limitations
imposed by an intercreditor agreement, to prepay in whole or in part the revolving loans and tranche A-1 loans (and the tranche A-2 loans
following the payment in full of the revolving loans and tranche A-1 loans). However, in the event of any prepayment of the tranche A-1 loans
that have a maturity date of June 30, 2016, the Plant Owners must pay a premium equal to the present value of all interest payments that would
have accrued from the date of such payment through June 30, 2016, calculated using a discount rate, applied quarterly, equal to the Treasury
Rate as of such prepayment date plus 50 basis points.

These terms make is cost prohibitive to pay any of this debt off. Which is why they have paid off other debt first: Jan 2013 debt and the revolving credit facility. The losses involved in paying off this debt would put them in the red (~$20M in fees), cost shareholders long-term and bring all sorts of negative attention to the decision by analysts. I have never seen a company with similar covenants choose that path. I would looks at PEIX to build cash balances, buy remaining ownership or share buyback before any of these fees are paid (unless mandatory payments are required by violating certain profitability metrics).

What this does do is make PEIX a very good acquisition candidate. I have not found any poison pills in all the documentation I have found. They have a good strategic location, with a long term competitive advantage, making money hand over fist with a under-priced stock.