Philadelphia Energy Solutions files for bankruptcy after refinery fire, secures DIP financing

Philadelphia Energy Solutions files for bankruptcy after refinery fire, secures DIP financing
Published: 24 July 2019 - 10 a.m.
By: Martin Menachery
PES Energy and its subsidiaries (including its principal operating subsidiary, Philadelphia Energy Solutions Refining and Marketing) announced that they had filed for bankruptcy protection under Chapter 11 of the United States Code and had entered into a proposed debtor-in-possession (DIP) financing agreement with holders of the company’s outstanding term loan debt providing for up to $100mn in new funding.

This proposed 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 the proposed financing agreement, the company will work with its stakeholders toward a restructuring implemented through a Chapter 11 Plan. The company expects to establish an orderly process for the evaluation of a range of potentially value-maximising transactions in the weeks ahead 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.

Today’s agreement provides PES Energy with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations and, with the support of our insurers and stakeholders, best position the company for a successful reorganisation, the rebuilding of our damaged infrastructure, and a restart of our refining operations,” said Mark Smith, chief executive officer of PES Energy.

“We will continue our ongoing cooperation with the federal, state and city governmental agencies investigating the June 21 accident and thank them and our employees for their diligent efforts at this difficult time. The success of our plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania and the City of Philadelphia.”

Since inception in 2012, PES Energy and its owners have invested substantial capital to improve the Philadelphia refining complex. As a result, PES Energy has been able to continue to supply essential refined products to the Northeast region.

However, the recent fire and explosions at the company’s alkylation unit caused substantial property damage, impacted the company’s liquidity, and caused the recent suspension of refining operations at the complex. The company will work on a comprehensive resolution with its stakeholders and insurers in the weeks ahead with the goal of rebuilding the damaged facilities.

Smith continued: “I would also like to thank our lenders and equity holders for their support throughout this process and the challenges of recent weeks. We also greatly appreciate the unwavering loyalty of our employees and their continued support.”

The company’s legal advisor in connection with the restructuring is Kirkland & Ellis. Alvarez & Marsal serves as its restructuring advisor. PJT Partners is the company’s investment banker. The company’s proposed DIP financing lenders are represented by Davis Polk & Wardwell and Houlihan Lokey Capital.

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