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Pacific Ethanol Signs Agreements To Raise Up To $14 Million To Reduce Debt, Acquire Plant Ownership

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Pacific Ethanol Signs Agreements to Raise Up to $14.0 Million to Reduce Plant Debt and Acquire Additional Plant Ownership Interest

-- Enters into agreements to issue up to $14.0 million in subordinated convertible notes and acquire an additional 3% Plant interest, increasing ownership to 83%

-- $6.0 million of the financing to close within two business days subject to satisfaction of closing conditions and $8.0 million of the financing to close in June 2013 subject to satisfaction of closing conditions and stockholder approval

-- Net proceeds to be used to: -- Purchase $6.6 million of Plant debt maturing in June 2013

-- Acquire an additional 3% Plant ownership interest

-- Purchase and retire $3.5 million of Plant debt maturing in 2016

-- Provide $2.0 million in cash reserves to Pacific Ethanol

-- Prepay a portion of senior unsecured notes

-- Increase plant liquidity and reduce interest expense

Pacific Ethanol, Inc. (Nasdaq: PEIX), the leading marketer and producer of low-carbon renewable fuels in the Western United States, has entered into agreements to raise up to $14.0 million in two installments by issuing $6.0 million in subordinated convertible Series A notes, together with Series A Warrants and Series B Warrants ("Tranche A") and, subject to stockholder approval, an additional $8.0 million in subordinated convertible Series B notes ("Tranche B"). The company has also entered into agreements to, among other things, purchase certain outstanding debt currently due in June 2013 ("June Debt"), retire debt due in June 2016 ("2016 Debt") and prepay a portion of its senior unsecured notes ("Senior Notes"), while lowering overall debt costs and improving cash available to Pacific Ethanol.

Both the Tranche A and B notes (together, the "Notes") will mature one year from the issuance of the Tranche A notes and will accrue interest at 5.00% per annum from their respective dates of issuance. The Notes may be repaid, at the company's election, in either cash or, subject to certain conditions, shares of the company's common stock. The Notes are also convertible from time to time, at the election of the holders, into shares of the company's common stock at a conversion price of $1.00 per share. Warrants to purchase an aggregate of 27,594,000 shares of the company's common stock will be issued with the Notes and will have an initial exercise price of $0.52 per share, representing a 50% premium to the closing bid price of the company's common stock on March 27, 2013. The Series A Warrants will have a term of two years from issuance and will be exercisable beginning one year from issuance. The Series B Warrants to purchase 15,768,000 shares of Common Stock are subject to stockholder approval of the Tranche B Notes, will have a term of two years from such stockholder approval and will be exercisable beginning one year from such stockholder approval. If such approval is not obtained, such warrants will not be exercisable and will expire. The Notes and the Supplemental Indentures relating to the Notes will include certain covenants, including, among other, the punctual payment of principal and interest, certain limitations on the incurrence of indebtedness, restrictions on the redemption of outstanding securities, restrictions on the transfer of assets and restrictions on the existence of liens on the company's assets.

Estimated net proceeds, after deducting placement agent fees, of $5.6 million from the issuance and sale of the Tranche A notes and related Warrants are expected to be used to (1) purchase approximately $2.6 million of June Debt and an aggregate 3% additional ownership interest in the Pacific Ethanol Plants from existing Plant lenders, for a total purchase price of $2.1 million; and (2) purchase and retire approximately $3.5 million of 2016 Debt from existing Plant lenders at par. The company will also amend the purchased June Debt to extend the debt's maturity date from June 25, 2013 to June 30, 2016.

Estimated net proceeds, after deducting placement agent fees and other expenses in connection with the sale of the Notes, of $6.5 million from the issuance and sale of the Tranche B notes and related Warrants, if approved by the company's stockholders, are expected to be used to (1) purchase the remaining $4.0 million of June Debt from existing Plant lenders at a price to be negotiated; (2) fund $2.0 million in reserves at the parent; and (3) repay a portion of the Senior Notes.

Upon the Tranche A closing, the Pacific Ethanol Plants will also obtain $5.0 million in further availability under an existing credit facility to provide additional liquidity for operations.

The Tranche A and related transactions are subject to the satisfaction of numerous closing conditions and are expected to close within two business days. The Tranche B and related transactions are subject to the satisfaction of numerous closing conditions, including stockholder approval, and are expected to close in June 2013; however, there can be no assurance that the closing conditions will be satisfied and the transactions will close. Lazard Capital Markets LLC served as the sole placement agent for the Tranche A and Tranche B transactions. Additional details are available in the company's Form 8-K, which is scheduled to be filed today with the Securities and Exchange Commission ("SEC").

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