Aventine shares fall as analyst warns of cash shortfall

NEW YORK—Shares of Aventine Renewable Energy Holdings Inc. fell Monday after an analyst warned that the ethanol producer faces a cash shortfall.

Lehman Brothers analyst Mansi Singhal estimated, in a client note, that Aventine faces a cash shortfall of $60 million.

"Given the company's reluctance to delay the construction of its plants, none of the other options seem favorable right now," the analyst wrote. "The company is talking to banks to extend its credit line; however, we understand such rescue financing can be expensive, to the tune of 15 percent."

Singhal also said the shares' 26.3 percent gain since first-quarter results, which beat analysts estimates by 1 cent, was "overdone."

Calyon Securities analyst Kelly Dougherty wrote that the reputation of the Brookings, S.D., company may enable it to obtain favorable treatment from companies engaged in expanding capacity.

"It is possible that contractors, who have increasingly seen projects canceled due to tight market conditions, may be more flexible with an established player like (Aventine)," Dougherty wrote.

"We therefore think it is likely that (Aventine) is granted some leeway on its payment terms and likely an increase in credit from its lenders to keep the expansion on track."

Both Dougherty and Singhal have a "Neutral"-equivalent rating on the shares, which fell 27 cents, or 5 percent, to $5.16 in afternoon trading.

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