Biofuels Company Won’t Pay State of Mississippi After Bankruptcy

- Jan­u­ary 10, 2015, Fuel Fix

Bank­rupt bio­fu­el mak­er KiOR and con­trol­ling share­hold­er Vin­od Khosla say the state of Mis­sis­sip­pi is using legal tac­tics in an attempt to squeeze mon­ey from the company.

KiOR, based in Pasade­na, fired back Thurs­day at the Mis­sis­sip­pi Devel­op­ment Authority’s Decem­ber call to con­vert KiOR’s case from Chap­ter 11 reor­ga­ni­za­tion into Chap­ter 7 liquidation.

“The motion reflects a con­tin­u­a­tion of the MDA’s aggres­sive and scorched-earth lit­i­ga­tion in this case, which appar­ent­ly is intend­ed to extort a recov­ery from the debtor and the Khosla-relat­ed plan sup­port par­ties,” lawyers wrote in a papers filed in U.S. Bank­rupt­cy Court in Delaware.

KiOR denies MDA’s claims that it’s manip­u­lat­ing its case to ben­e­fit Khosla, a bil­lion­aire ven­ture cap­i­tal­ist who has invest­ed heav­i­ly in alter­na­tive ener­gy. A new com­pa­ny con­trolled by Khosla is in line to buy KiOR’s assets, say­ing it will con­tin­ue KiOR’s research meant to turn wood chips into a crude oil substitute.

Khosla’s com­pa­nies, in their own motion, say the case is not over­ly com­pli­cat­ed and that the Khosla enti­ties are not gain­ing any unfair advantage.

“In fact, they stand to lose the most — more than three times as much as the MDA,” Khosla’s lawyers wrote. “And notably, nei­ther the Khosla par­ties nor any indi­vid­u­als asso­ci­at­ed with the Khosla par­ties ever sold a sin­gle share of stock, which is now worthless.”

It’s the lat­est turn in what’s becom­ing a nasty legal fight between Mis­sis­sip­pi and KiOR, which state lead­ers once hailed as an eco­nom­ic boon for the state. MDA at first coop­er­at­ed with KiOR’s attempts to reor­ga­nize in hopes of max­i­miz­ing how much mon­ey the state could col­lect from the sale of KiOR’s defunct Colum­bus refin­ery. But MDA and KiOR have become increas­ing­ly con­fronta­tion­al after the com­pa­ny filed for bank­rupt­cy. MDA is depos­ing Khosla and oth­ers, and KiOR says it and oth­ers have turned over hun­dreds of thou­sands of pages of doc­u­ments to MDA lawyers.

KiOR says more than 20 buy­ers con­sid­ered buy­ing its assets. But Thurs­day it filed notice that no out­siders want to bid, mean­ing a new Khosla-con­trolled enti­ty called Pasade­na Invest­ments will buy KiOR’s assets if the judge approves KiOR’s plan.

The com­pa­ny accused MDA of try­ing to sab­o­tage its ongo­ing oper­a­tions near Hous­ton, to take the jobs of KiOR’s remain­ing 70 employ­ees and to “force the aban­don­ment of promis­ing bio­fu­el, alter­na­tive ener­gy tech­nol­o­gy that can deliv­er real hydro­car­bon trans­porta­tion fuels from cel­lu­losic feedstock.”

MDA, though, says KiOR’s attempts to refine bio­fu­els are a fail­ure with no imme­di­ate prospects of com­mer­cial pro­duc­tion. The state says KiOR has no real busi­ness prospects and that the court should pull the plug.

The state says KiOR’s Mis­sis­sip­pi sub­sidiary, which hasn’t declared bank­rupt­cy, owes it $79 mil­lion. But because MDA doesn’t have a mort­gage on the assets of the par­ent com­pa­ny, it could get no mon­ey back in the bankruptcy.

KiOR says it won’t pay up as a result of “MDA’s hyper-aggres­sive lit­i­ga­tion scheme.”

“The debtor believes that reward­ing such destruc­tive behav­ior is unsound,” lawyers wrote.