KiOR files bankruptcy, accepts stalking horse bid from senior lenders

By Caroline Salls

Pittsburgh, Nov. 10 – KiOR, Inc. filed Chapter 11 bankruptcy on Sunday in the U.S. Bankruptcy Court for the District of Delaware and accepted a bid for substantially all of its assets from affiliates of Vinod Khosla that provide senior secured financing to the company, according to a news release.

KiOR said the bid was accepted as part of its refocus on research and development. The bid is subject to higher and better offers, as well as bankruptcy court approval.

If the stalking horse bidder is ultimately the successful bidder, a plan support agreement requires KiOR to complete the sale through a plan under which the company’s business would be preserved as a going concern through the cancellation of existing equity and the issuance of new equity interests to the stalking horse bidder.

The equity would go to the stalking horse bidder in exchange for cancellation of substantial secured debt and the provision of exit financing.

Competing bids must carry a minimum cash purchase price of $17.14 million and are due by 4 p.m. ET on Dec. 15.

The auction will be held on Dec. 17. Bids at auction must be made in minimum increments of $250,000.

KiOR said KiOR said it expects to move through this proceeding as quickly as possible with a potential auction requested in December.

The company said its non-operational production facility in Columbus, Miss., which is a wholly owned subsidiary of KiOR, is not included in the filing.

Plan terms

Also under the proposed plan terms, a portion of second-lien claims may be included in an overbid. The unsecured portion will be preserved, and holders will retain the right to receive the benefits of any turnover provisions.

Holders of third-lien claims will receive no distribution.

Holders of other secured claims will either be paid in full in cash, receive the collateral securing the claims or be otherwise left unimpaired.

Holders of general unsecured claims will receive rights to participate in a trust, which will be vested with the estate’s causes of action.

Continuing trade creditors can opt into a class that will give them the same treatment as general unsecured creditors, plus 50% of the amount of their claims in cash and a release from causes of action in exchange for an agreement to accept the plan and continue to provide goods and services for at least one year from the plan effective date.

Holders of convenience claims will receive 50% of their claim in cash, provided that the total payment for this class will be capped at $75,000.

DIP financing

In connection with the filing, the company obtained a commitment for up to $15 million of debtor-in-possession financing from an affiliate of Khosla.

The financing will be used to fund KiOR’s operations while in bankruptcy and to facilitate the sale and restructuring process.

Pasadena Investments, LLC is the DIP financing agent and lender.

The facility will mature on the earliest of 30 days after entry of the interim order if a final order has not been entered, six months from the date of the credit agreement, the effective date of Chapter 11 plan and the closing of a sale of company assets.

Interest will be 7.5%, paid in kind.

The company is seeking interim access to $2.5 million of the financing.

Debt details

According to court documents, KiOR had $58.27 million of total assets and $261.31 million of total debt as of June 30.

The company’s largest unsecured creditors are WilmerHale of Washington, D.C., with a $1.31 million trade debt claim and Matheson Tri Gas – Dallas with a $1.09 million trade debt claim.

According to an 8-K filed with the Securities and Exchange Commission, KiOR’s bankruptcy filing constituted an event of default that accelerated its obligations under a protective advance loan and security agreement. A total of $14.8 million was outstanding under that agreement as of Sunday.

However, the company said attempts to enforce the default-related rights are automatically stayed as a result of the bankruptcy filing.

Nasdaq delisting

In addition, KiOR said it was delisted from trading on the Nasdaq stock exchange, effective Nov. 6.

The company said it does not anticipate any recovery for existing common shareholders as part of the Chapter 11 proceedings.

The company’s legal advisers are King & Spalding and Richards Layton & Finger. Alvarez & Marsal is serving as financial advisers.

According to a separate 8-K, Vinod Khosla is a trustee and beneficiary of KFT Trust and the managing member of VK Services, LLC, which is the manager of Khosla Ventures Associates II, LP and Khosla Ventures Associates III, LP.

KiOR said Pasadena Investments is a wholly owned entity of KFT Trust. In addition, some shares of KiOR’s class A common stock are owned by entities affiliated with Khosla, and Khosla Ventures is a significant KiOR stockholder.

KiOR is a Pasadena, Texas-based development-stage, next-generation renewable fuels company. The Chapter 11 case number is 14-12514.

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