Philadelphia Energy files for Chapter 11 bankruptcy
October 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING
Financier Worldwide Magazine
October 2019 Issue
Following explosions and a fire at its oil refinery that permanently closed operations, Philadelphia Energy Solutions Refining and Marketing LLC has filed for Chapter 11 bankruptcy protection.
The filing by Philadelphia Energy, a subsidiary of the industrial and commercial energy procurement specialist PES Energy Inc, is its second in less than two years. PES first filed for bankruptcy in January 2018, having struggled financially for years.
In addition, the company has entered into a proposed debtor-in-possession (DIP) financing agreement with holders of its outstanding term loan debt providing for up to $100m in new funding.
The DIP financing provides the company with a strong financial foundation to support existing operations, undertake the work necessary to ensure the refinery complex is safely positioned for rebuilding, and restart and complete its reorganisation process.
With a financing agreement in place, Philadelphia Energy will work with its stakeholders toward a restructuring implemented through Chapter 11. The company expects to establish an orderly process for the evaluation of a range of potentially value-maximising transactions and to work expediently with its insurers, stakeholders and third parties toward its goal of reaching a consensual plan, rebuilding the damaged infrastructure and resuming refining operations.
“The agreement provides the additional financing and liquidity necessary to ensure we safely wind down our refining operations,” said Mark Smith, chief executive of PES Energy. “With the support of our insurers and stakeholders, we can best position the company for a successful reorganisation, the rebuilding of our damaged infrastructure and a restart of our refining operations.”
Since inception in 2012, PES Energy and its owners have invested substantial capital to improve the Point Breeze and Girard Point oil refineries located on an integrated, 1300-acre refining complex in Philadelphia. As a result, PES Energy has been able to continually supply essential refined products to the Northeast region of the US.
However, the fire and explosions at the complex in June 2019 caused substantial property damage, impacted the company’s liquidity and caused the suspension of refining operations. Shortly thereafter, PES began shutting down the 335,000 barrel-per-day Philadelphia plant without a planned restart date. Approximately 1000 employees are scheduled to be laid off. Additionally, hundreds of contractors are also expected to be affected by the shutdown.
“We will continue our ongoing cooperation with the federal, state and city governmental agencies investigating the accident and thank them and our employees for their diligent efforts at this difficult time,” continued Mr Smith. “The success of our plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania and the City of Philadelphia.”
PES Energy’s legal adviser in connection with the restructuring is Kirkland & Ellis LLP. Alvarez & Marsal is serving as restructuring adviser, with PJT Partners as investment banker. The company’s proposed DIP financing lenders are represented by Davis Polk & Wardwell LLP and Houlihan Lokey Capital, Inc.
Mr Smith concluded: “I would like to thank our lenders and equity holders for their support throughout the Chapter 11 process. We also greatly appreciate the unwavering loyalty of our employees and their continued support.”
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