Allegro agrees to sell Louisiana plant

By Bryan Sims | June 17, 2008
Web exclusive posted June 24, 2008 at 1:13 p.m. CST

Los Angeles-based biodiesel producer Allegro Biodiesel Corp., formerly Diametrics Medical Inc., has entered into a definitive agreement with Consolidated Energy Holdings LLC, in which CEH will purchase Allegro Biodiesel's wholly owned subsidiary Vanguard Synfuels LLC. The subsidiary holds all of Allegro's biodiesel operations and related assets, including its 15 MMgy biodiesel plant currently operating in Pollock, La. The transaction is subject to the receipt of shareholder consents and other customary conditions.

According to an 8-K filing through the U.S. Securities and Exchange Commission on June 17, the terms of the transaction will enable CEH to assume Vanguard's outstanding $2.9 million in senior secured debt and all existing employment agreements for employees of Allegro and Vanguard. Vanguard comprises substantially all of the operating assets of Allegro. Allegro expects to close the transaction within the next six to eight weeks, the company said in its SEC statement.

Darrell Dubroc and Tim Collins, members of CEH, and also current officers and directors of Allegro, will resign from their positions with Allegro upon closing, and CEH will fund certain transaction expenses and continue to fund Vanguard's operating expenses, which it began doing when Allegro announced its intent to sell its biodiesel plant in May.

According to Allegro Chief Executive Officer Bruce Comer III, the impetus behind Allegro's decision to sell its facility and its biodiesel-related assets was attributed to the high volatility that the biodiesel market has exhibited over the past six to eight months. "If you looked at our financials last quarter, we were in financial distress, and this transaction really cleans up all of our liabilities," Comer said. "We're going to skinny down our corporate staff and expenses to explore other options in the renewable energy industry. We're going to end up with a better financial situation, and we'll be opportunistic once we clean up the balance sheet."

Upon closing of the transaction, Allegro will have eliminated all of its secured debt and most of its outstanding liabilities. Although it will no longer have operations on the closing date related to its biodiesel operations, Allegro will continue as a publicly traded company, and it will have several nonoperating assets, including its remaining cash, a $1 million equity investment in Community Power Corp., a $250,000 note receivable from CPC and Allegro's claims on the remaining assets in the escrow agreement that was established when the company originally acquired Vanguard in September 2006.

Earlier this year, Allegro signed a binding letter of intent to partner with an unnamed investor group for the acquisition, development and operation of a dedicated liquid terminal at the Port of Alexandria in Louisiana. The venture called for 22 acres of adjacent land with existing liquid terminal infrastructure, including 5 million gallons of tank storage and a fuel rack. Earlier this year, the company also announced it would receive and begin processing its first shipment of crude jatropha oil from Global Clean Energy Holdings Inc., a Los Angeles-based biofuel feedstock development company, at its facility in Pollock.

Comer said the liquid terminal partnership didn't fall through due to financial hurdles that impeded progress. As for the jatropha shipment, this may be pursued by Vanguard and its affiliates once Allegro is freed from its liabilities of the plant.

Meanwhile, Allegro will be actively exploring strategic transactions in its effort to develop a new corporate strategy, Comer said. One option it may consider is building upon its biomass gasification assets through its minority stake in CPC. "Given that we have a minority stake in the renewable sector, we're also open-minded to other opportunities, too, and whatever opportunities will be better-suited for our shareholders," Comer said.
 
 
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