Back in February of this year, biofuel company KiOR announced that it would be seeking a loan guarantee from the Department of Energy and that it had received a term sheet for that commitment. The company, which debuted on the Nasdaq on June 24, pointed to the loan guarantee term sheet in its S-1 filings (the latest S-1 amendment publicly available is from June 22) as one of the reasons for the value of its common stock.
But according to correspondence with the Security & Exchange Commission dated June 1 (which was either just released or I just noticed), KiOR says that on May 15 it “voluntarily requested” to have its loan application placed on hold under the 2011 loan guarantee program and placed in line for consideration for a 2012 program. Depending on the DOE 2012 budget, it remains to be seen how much funding the loan guarantee program will get for 2012, or if it will get any at all.
KiOR’s legal council says in the June 1 letter that it asked the DOE to put the application on hold after the DOE loan guarantee program sent it a letter on May 10, notifying KiOR that it was “continuing consideration” of its application and that it had set June 16 as a date for its “application completion deadline.”
KiOR says that in that May 10 letter, the DOE also told loan guarantee applicants that any companies that received loan guarantee commitments had to obtain the underlying loan, and start construction on the project being funded, before September 30 of that year. KiOR says in its June 1 letter that the September 30 deadline “presented potential execution hurdles in light of the Company’s other projects, including the pending IPO.”
KiOR also said in the June 1 letter that it believed that in 2012 it would be able to find loan terms “at least comparable to those offered by the DOE,” given KiOR says it started building its initial-scale commercial production in the first quarter of 2011 and plans to start construction of a larger commercial production facility in the third quarter of 2012.
Clearly KiOR was in a hurry to get its IPO out earlier this year, and in the summer of 2011 it has been experiencing an IPO window for a variety of companies, from web firms to biofuel makers. KiOR debuted on the Nasdaq on June 24, a week and a day after the June 16 deadline date that the DOE gave it to finish its loan guarantee application. In correspondence KiOR and its underwriters asked the SEC to accelerate its S-1 filing process.
In correspondence between KiOR and the SEC (dated May 27), the SEC asks KiOR questions about an amendment to an S-1 removing discussion of the loan guarantee application (though the latest S-1 on the SEC’s website still discusses the loan guarantee in question).
We note that throughout your registration statement, you have deleted discussions related to the Department of Energy loan guarantee. Please tell us why you have deleted these discussions. To the extent that this guarantee is no longer viable, please tell us what impact, if any, you expect this to have on your liquidity generally and your plans to construct standard commercial production facilities specifically.
KiOR’s stock took a beating in the overall market sell-off today, in the first day of trading after Standard & Poor downgraded the credit ratings of credit agencies. KiOR’s stock dropped 15.74 percent.
Entities affiliated with Khosla Ventures owned 74.8 percent of KiOR’s combined Class B and Class A common stock post-IPO, and they held 72.4 percent of the combined voting power of Class A & B common stock. Investors typically have a 180-day lock-up period before they can get cash out of their shares.