Moody's upgrades Aventine

Moody's Investors Service said it upgraded Aventine Renewable Energy Holdings, Inc.'s corporate family rating and senior notes due 2011 to B2 from B3 and affirmed the company's SGL-1 speculative grade liquidity rating. The outlook is stable.

The agency said the upgrade reflects Aventine's debt reduction and significant cash balances following its initial public offering in July, strong operating results in 2006 and favorable industry environment. Aventine's IPO raised about $262 million after discounts and commissions to underwriters. Approximately $164.6 million was applied toward retiring $155 million of Aventine's $160 million notes due 2011 and the remaining IPO proceeds have been retained as cash on Aventine's balance sheet.

The ratings also reflect the risks associated with the developing nature of the industry, industry economics that are driven by government legislation, low barriers to entry, aggressive competing capacity expansions that could lead to oversupply and lower ethanol prices, the presence of competitors with substantially greater resources, Aventine's narrow product profile with predominately one commodity product (ethanol), modest firm size, the lack of correlation between input costs and ethanol prices impacting margins and the potential for additional leverage as the firm expands capacity, Moody's said.

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