Renewal Fuels in default after failing to pay off secured convertible debt

By Devika Patel

Knoxville, Tenn., May 7 - Renewal Fuels, Inc. negotiated a forbearance agreement with holders of its $4,249,720 of secured convertible debt on April 28, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

As of April 21, the company owes $562,920.23, which includes the $4.25 million of principal plus unpaid interest, according to the filing.

The company gave formal written notice to the investors, Montgomery Equity Partners, Ltd. and YA Global Investments, LP, of the events of default, which include failing to repay a portion of the notes which had matured, and the forbearance agreement was orchestrated to eke out a remedy for the default.

According to the agreement, the investors agreed to refrain from exercising their rights under the loan agreement until Sept. 30, unless there is a new default under the loan.

Under the new agreement, the company agreed to reduce the strike price of YA's warrant for 1.05 million common shares to $0.001 per share. It also agreed to increase the debt's coupon to 13%.

The company now may prepay the debt at any time before Sept. 30 and extend the maturity of a portion of the debt to Sept 30 from Dec. 28, 2006. This portion of $549,720 is the only amount that has or will mature prior to Sept. 30.

Based in Milwaukee, Renewal Fuels designs, develops, manufactures and markets biodiesel processing equipment and accessories to convert used and fresh vegetable oil into clean-burning biodiesel.

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