Petroplus joint administrators: Restructuring best option for refinery

By Caroline Salls

Pittsburgh, March 13 - Petroplus Refining & Marketing Ltd. has released a presentation in which it told holders of senior notes and convertible bonds guaranteed by the company that refinancing and restructuring in connection with its Coryton refinery in Essex, England, "creates the prospect of [an] optimal recovery."

Petroplus' joint administrators met with noteholders on Monday to provide an update on the status of the company's administration and to outline the options for the company and consequences for creditors.

The administrators said the company's options are closure of the refinery, an immediate sale of the refinery or refinancing and restructuring.

Although "exceptionally challenging hurdles have been cleared to date," the administrators said, the refinery still faces closure absent a transaction in the short term.

The administrators said there is no equity cushion and there are substantial market and operational risks.

According to the presentation, on-closure recoveries for creditors would be minimal.

Under the restructuring option, existing creditors would convert their debt to equity.

The administrators said about $1 billion of financing would be required, including $750 million of working capital needed on a "business-as-usual basis."

According to the presentation, new-money equity participation would be likely in a debt-for-equity conversion.

The two options for implementing the restructuring include Company Voluntary Arrangement under the Insolvency Act of 1986 and a "hive down" by the administrators with a distribution mechanic.

In the presentation, the administrators said merger and acquisition negotiations are ongoing.

However, according to the presentation, the average refinery sale process extends beyond 12 months and there are few credible, well-capitalized bidders and extensive holding costs during the sales process.

The administrators said more than 50 parties have been contacted in connection with the sale option.

With a decrease in demand, imbalances in supply and demand in Europe and competition from the Middle East, the administrators said well differentiated refineries would survive.

The administrators said "risks mean time is short for either M&A or restructuring," and a contingency plan for closure of the refinery is ready.

Looking ahead, the administrators said their proposals would be put to a creditor vote and noteholder preferences would be identified.

As previously reported, PricewaterhouseCoopers LLP partners Steven Pearson and Stephen Oldfield were appointed as joint administrators by the High Court of Justice in England and Wales on Jan. 24.

Zug, Switzerland-based Petroplus Holdings AG is an independent refiner and wholesaler of petroleum products in Europe.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.