Wells Fargo Capital Finance was the left lead agent in underwriting $425 million to support an asset-based lending deal with St. Bernard Renewables, a subsidiary of PBF Energy, as it converted an idled refinery unit to process and produce renewable diesel.

On this deal, Wesley Shaw, senior vice president of originations at Wells Fargo Capital Finance, led the team, which had an existing relationship with PFB Energy that proved beneficial in closing the transaction in June. As Shaw explains, executing this deal, which included many term sheet iterations, required an understanding of the budding renewable energy business, as it is sector for which some lenders lack the expertise to provide financing. Shaw says Wells Fargo is a strong supporter of renewable energy, so St. Bernard Renewables’ mission of providing renewable diesel aligned with its goal of being a part of that future.

“What’s really attractive about renewable diesel is it can go into any truck that burns diesel. Biodiesel is highly prevalent, but not all vehicles can accept biodiesel without it being properly blended,” Shaw says. “This allows everyday trucks to farming equipment to 18-wheelers, they can put it in their truck and it’ll burn just like diesel, albeit at a much cleaner alternative to traditional diesel.

“A lot of lenders just are not going to lend to a startup [in this space]. While this is renewable product, it still falls in their bucket of oil and gas and they just simply won’t lend into that space. Wells Fargo doesn’t take that stance. The amount of banks that have interest here is going to be smaller.”

This deal presented some unique challenges for Shaw’s team to navigate, including providing financing on the company’s working capital for feedstocks that are not commoditized.

“For feedstocks that are somewhat opaque, they will become commoditized. But as the world stands today in soybean oil, animal fats, corn oil, those feedstocks are not [readily available for price estimations]. I can’t go just look up a market price for those,” Shaw says.

The feedstock factor was pertinent because St. Bernards’ refinery produces up to 21,000 barrels per day, and the most effective method for transporting those barrels is via vessel, something most lenders aren’t necessarily comfortable with when 250,000 barrels are on the water, sometimes in international waters, for 10 to 15 days at a time.

“We were able to do some blocking and tackling just to get comfortable while it is in international waters. And the UCC filing is not necessarily applicable or enforceable for the period of time while it’s on international water, so we were able to mitigate that risk by having some agreements in place with their customs and borders agent, the freight forwarding agreement, and so forth,” Shaw says.

In addition to its own role, Wells Fargo Capital Finance encouraged secondary financing providers to feel comfortable and confident with the startup nature of the client and unique flavor of the borrowing base.