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U.S.-Backed ZeaChem Reduces Staff While Seeking Financing

March 28 (Bloomberg) -- ZeaChem Inc., a closely held producer of ethanol and chemicals from wood that received U.S. backing, reduced staff while it seeks a bridge loan.

The company laid off an undisclosed number of employees at its headquarters in Lakewood, Colorado, a plant in Oregon and a lab in Menlo Park, California, after it failed to secure a bridge loan “intended to carry ZeaChem into its next funding round,” according to an e-mailed statement today. ZeaChem said it intends the scale back in operations to be “a short-term event.”

ZeaChem last year was offered a $232.5 million loan guarantee from the U.S. Agriculture Department to build a cellulosic-ethanol plant in Boardman, Oregon. Zeachem expected to spend about $391 million on the plant. The company uses a microorganism found in termites and other insects to process five- and six-carbon sugars without producing carbon dioxide as a byproduct.

“ZeaChem’s experienced management team is committed to the top priority of quickly raising additional capital in order to get employees back to work,” the company said, and wouldn’t say how many employees are affected or how many people it employs. “We cannot provide more details about personnel issues.”

A demonstration plant adjacent to the Boardman facility is being funded in part by a $25 million Energy Department grant and a $12 Agriculture Department grant, according to data compiled by Bloomberg. The company said March 12 that ethanol production began at the demonstration plant.

The staff reduction at the Boardman plant was first reported today by Biofuels Digest.

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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