Earth BioFuels Inc. reaches out of the court settlement with BVI-based Castlerigg and other creditors

Earth BioFuels Inc. a Dallas-registered company which licenses the organic-based diesel fuel, said in regulatory filings that it had reached an out-of-court settlement with a group of creditors who tried to force it to liquidate some months ago. This group of investors included also British Virgin Islands company Castlerigg Master Investments Ltd., which, together with others, agreed to force Earth BioFuels into bankruptcy in exchange for being owed just over $100 million collectively, with interest and fees still accumulating.

Earth BioFuels admitted in court that it failed to meet some of the obligations concerning the investor financing, and that it would not contest the $100 million figure. The company lost $21 million through the first six months of 2007, on revenue of $4.8 million. It has been hurt by market factors surrounding the biofuels industry, and needs new financing to continue operations. During this year, shares of Earth BioFuels lost 95% of their value.

As part of the current agreement, Dallas company’s CEO Dennis McLaughlin has agreed to a limited personal guarantee for an unidentified portion of the debt. Earth BioFuels filed the documents on Tuesday, and next day the company asked the Securities and Exchange Commission for permission to delay filing its quarterly financial statements. Messages left with lawyers for the BVI-based Castlerigg were not returned on Wednesday, and Earth Biofuels spokesman Shawne Horn said the company expects to have a news release.

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