GO-ing Gone: Ethanol plant sale approved

TOLEDO - After five months in operation and almost as much time in bankruptcy court, Greater Ohio Ethanol now has a new owner.

Judge Mary Ann Whipple, of the U.S. Bankruptcy Court for the Northern District of Ohio, gave final approval to the sale of the failed ethanol plant Wednesday, opening the gate for Paladin Capital Group to take ownership of the now-shuttered ethanol plant.

The final sale motion came after months of hearings in bankruptcy court and three failed auctions as lawyers for the plant and its creditors attempted to recover some of the $150 million that went in to building the plant. In the end, the Washington, D.C.-based capital firm paid $5.75 million in cash and a promise to pay a little more than $15 million more in the future, which will be used to cover some of the debt to SunTrust, the bank that put about $94 million into the operation.

Paladin executives were not in the courtroom Wednesday. Calls and e-mails to their office were not returned. But in a hearing last week, GO Ethanol attorney Tim Hurley said the company planned to open and operate the facility as a working ethanol plant.

Most of Wednesday's hearing was spent debating the rights to any assets left after the sale. Because the plant is selling for millions less than is actually owed on it, the only thing of value left is the potential income from future lawsuits filed on behalf of the plant. GO Ethanol's current managers could potentially sue contractors or others they blame for the design problems that made the $150 million plant too expensive to operate.

The debate comes down to whether the primary debtors - SunTrust, with $94 million in the plant - has the only claim to that future money or if the subjugated lenders, with a total of $12 million to $15 million owed them, can attach that possible future money. There are more than 200 creditors listed in the bankruptcy filings, including the city of Lima and dozens of local investors who paid $50,000 each for an interest in the plant

In the end, the lawyers agreed on language that assured an 80/20 split of future income with the biggest piece going to SunTrust and preserving the rights of subdebtors to, as Whipple put it, "complain about the 20 percent down the road."

Ronald Gold, attorney for the group representing the plant's unsecured creditors, said the rights of those creditors are protected by the agreement.

"It doesn't allow their claim or disallow their claim. There's nothing in here that stops anybody from making any claim they might seek," Gold said.

Greater Ohio Ethanol began production in July and filed for bankruptcy protection less than five months later. President Greg Kruger has said a design flaw in the plant resulted in increased water usage and increased waste, which put the plant in financial trouble from the beginning. Kruger was unavailable for comment Wednesday. He has refused to comment on the proceeding since November, when it was announced the plant would be sold.