5. Debt

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Debt

Long-term borrowings are summarized as follows (in thousands):

	March 31, 2017			December 31, 2016
Kinergy line of credit	$	48,504		$	49,862
Pekin term loan		64,000			64,000
Pekin revolving loan		32,000			32,000
Pacific Aurora line of credit		–			1,000
Parent notes payable		55,000			55,000
		199,504			201,862
Less unamortized debt discount		(1,490	)		(1,626	)
Less unamortized debt financing costs		(1,631	)		(1,708	)
Less short-term portion		(14,000	)		(10,500	)
Long-term debt	$	182,383		$	188,028

Kinergy Operating Line of Credit – As of March 31, 2017, Kinergy had additional borrowing availability under its credit facility of $24,897,000.

At March 31, 2017, there were approximately $280.0 million of net assets of the Company’s subsidiaries that were not available to be transferred to Pacific Ethanol in the form of dividends, loans or advances due to restrictions contained in the credit facilities of the Company’s subsidiaries.

6. COMMITMENTS AND CONTINGENCIES.

Sales Commitments – At March 31, 2017, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol and co-products. The Company had open ethanol indexed-price contracts for 382,700,000 gallons of ethanol as of March 31, 2017 and open fixed-price ethanol sales contracts totaling $21,607,000 as of March 31, 2017. The Company had open fixed-price co-product sales contracts totaling $27,294,000 and open indexed-price co-product sales contracts for 87,000 tons as of March 31, 2017. These sales contracts are scheduled to be completed throughout 2017.

Purchase Commitments – At March 31, 2017, the Company had indexed-price purchase contracts to purchase 32,337,000 gallons of ethanol and fixed-price purchase contracts to purchase $11,569,000 of ethanol from its suppliers. The Company had fixed-price purchase contracts to purchase $8,651,000 of corn from its suppliers as of March 31, 2017. These purchase commitments are scheduled to be satisfied throughout 2017.

Litigation – General – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. While there can be no assurances, the Company does not expect that any of its pending legal proceedings will have a material impact on the Company’s financial condition or results of operations.

The Company assumed certain legal matters which were ongoing at July 1, 2015, the date of the Company’s acquisition of Aventine Renewable Energy Holdings, Inc (“PE Central”). Among them was a lawsuit between Aventine Renewable Energy, Inc. (now known as Pacific Ethanol Pekin, LLC, or “PE Pekin”) and Glacial Lakes Energy and Aberdeen Energy, together, the “Defendants,” in which PE Pekin sought damages for breach of termination agreements that wound down ethanol marketing arrangements between PE Pekin and the Defendants. In February 2017, the Company and the Defendants entered into a settlement agreement and the Defendants paid in cash to the Company $3.5 million in final resolution of these matters. The Company did not assign any value to the claim in its accounting for the Aventine acquisition as of July 1, 2015. The Company recorded a gain, net of legal fees, of $3.2 million upon receipt of the cash settlement and recognized the gain in selling, general and administrative expenses in the consolidated statements of operations for the three months ended March 31, 2017.

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