KiOR misses loan payment, amends financing, explores alternatives

By Angela McDaniels

Tacoma, Wash., July 9 – KiOR, Inc. entered into a forbearance agreement with one of its lenders, amended a $25 million note purchase agreement and engaged Guggenheim Securities, LLC as financial adviser to help it review financing, transactional and strategic alternatives, according to an 8-K filing with the Securities and Exchange Commission.

Those alternatives include a possible merger, restructuring or sale of the company.

On June 30, subsidiary KiOR Columbus, LLC was unable to make the $1.88 million semiannual payment on its loan from the Mississippi Development Authority, of which KiOR is guarantor, and was in default as a result.

On July 3, the lender agreed to forbear from exercising its rights and remedies while the company explores its options. The forbearance period will end Oct. 31.

The company paid $250,000 to the lender for entering into the forbearance agreement.

KiOR Columbus entered into the loan in March 2011 under which the authority agreed to make up to $75 million of disbursements to KiOR Columbus from time to time reimburse costs incurred by KiOR Columbus to purchase land, construct buildings and purchase and install equipment for use in the manufacturing of the company’s cellulosic transportation fuels from Mississippi-grown biomass.

Changes to purchase agreement

On July 3, the company amended its senior secured promissory note and warrant purchase agreement with KFT Trust, an affiliate of a significant stockholder and of which Vinod Khosla is the trustee.

The amendment gives the company the ability to issue protective advance notes and decreased the maximum principal amount of notes allowed to be outstanding at any one time (other than protective advance notes) to $10 million from $25 million.

Protective advance notes are senior secured promissory notes that may be purchased at the sole discretion of KFT Trust in the event the company needs liquidity funding to preserve, protect, prepare for sale or dispose of the collateral for the notes or to enhance the likelihood and maximize the amount of repayment of the notes.

Protective advance notes are senior to the company’s outstanding promissory notes under the note purchase agreement, which was entered into on March 31.

In the company’s most recent 10-K filing with the SEC, it expressed doubts about its ability to continue as a going concern and said the note purchase agreement was its only near-term source of financing.

The agreement is conditioned on the achievement of certain performance milestones. If it successfully achieves the performance milestones, the company expected to be able to fund its operations and meet its obligations only until Aug. 31.

New notes

On July 3, the company issued to KFT Trust a $250,000 8% protective advance note. The maturity date is the earliest of the completion of the protective loan facility (defined below), Aug. 1 and the acceleration of the secured obligations under the note purchase agreement.

Interest is payable monthly in kind.

Within 20 days after the effective date of the amendment, the company plans to enter into a protective loan facility with KFT Trust to provide short-term funding to preserve, protect, prepare for sale or dispose of the collateral or to enhance the likelihood and maximize the amount of repayment of the secured obligations and to fund the roll-up of the protective advance notes.

The company will use the proceeds from the sale of protective advance notes to pay immediate expenses until it enters into the protective loan facility.

KiOR is a Pasadena, Texas-based development-stage, next-generation renewable fuels company.

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