Heron Lake Bioenergy LLC has entered into a new loan agreement that will allow the struggling ethanol company to repay existing debt.

The company, headquartered in Heron Lake, Minnesota, operates a natural gas-fired ethanol plant. The plant produces fuel-grade ethanol, distillers' grains and crude corn oil.

Heron Lake has entered into a new loan agreement with AgStar Financial Services FCLA for a $28 million revolving term loan that will allow it to repay money it owes the lender from a previous facility, the company said in an Aug. 11 filing with the U.S. Securities and Exchange Commission. The money will also allow Heron to provide a $3.05 million loan to subsidiary Agrinatural Gas LLC so it can repay debt, provide working capital, and pay fees in connection with the company's refinancing.

After the loan closed on July 30, Heron Lake had about $7.5 million outstanding. The loan matures on March 1, 2022 and has a variable interest rate of Libor plus 325 basis points.

Heron refinanced in order to extend the company's maturity profile and increase financial flexibility.

The company had defaulted on a previous loan agreement with AgStar after it didn't meet requirements, including a minimum $5 million in working capital, at least $39.5 million in tangible net worth and a fixed-charge ratio of 1.2:1 or greater. The company didn't make principal payments to AgStar between December 2012 and May 2013 and was operating under forbearance agreements.

The default and volatile commodities prices raised substantial doubt about the company's ability to continue as a going concern, or without the threat of liquidation. Heron Lake's accountant, Boulay PLLP, said in January that the company's losses and lower-than-expected levels of working capital raised doubts about its ability to continue, according to a Jan. 29 SEC filing. 

Heron Lake's revenues were down in 2013 from $168.7 million in 2012 to $163.8 million in 2013. The company said that during 2013 the prices of ethanol and corn were "extremely volatile."

For the previous edition of Turnaround Tuesday, see "Struggling Leo Motors Raises Working Capital by Issuing Promissory Notes." 

For more troubled companies, see Mergers & Acquisitions Distressed Company Watch List