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Philadelphia Energy Files for Chapter 11 Bankruptcy After June Explosion

Stephen Stapczynski
(Bloomberg) -- Philadelphia Energy Solutions filed for bankruptcy protection and reached a financing agreement with debt holders as the fuel-making company grapples with the aftermath of a June explosion and fire at its oil refinery that forced it to shut operations.The company submitted Chapter 11 petitions at the U.S. Bankruptcy Court for the District of Delaware on Sunday. It also entered into a proposed debtor-in-possession financing agreement with holders of its outstanding term loan debt for up to $100 million, the company said in a statement.The moves provide the company “with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations,” Chief Executive Officer Mark Smith said in the statement.It will be the company’s second trip to bankruptcy court in less than two years, after emerging from Chapter 11 in August 2018. Estimated liabilities for this round are as high as $10 billion, according to the recent filings. The East Coast’s largest oil refiner said in June that it was dismissing more than 1,000 workers and shutting its plant, which could process 335,000 barrels of crude oil a day. There’s been little impact on gasoline prices in the eastern U.S. from the fire, with European refiners filling the gap.A unit of Dallas-based Trinity Industries Inc. holds the largest unsecured claim, of almost $4.1 million, the court filings show. CSX Transportation Inc. and BNSF Railway Co. are the next biggest, at $3.9 million and $3.5 million, respectively.Last month, a leak at an alkylation unit, which is used to make high-octane gasoline, triggered explosions and fire that stopped the refinery’s Girard Point section. The Point Breeze section -- which had been running at a reduced rate and was on track to run out of crude by Sunday night -- received about 500,000 barrels of crude over the weekend, enough to keep operating for another 6 days, according to a person familiar with the matter.However, the company has told some employees it plans to shut the plant Tuesday, according to a different person.The loan would allow the company to shut down safely, after which it would pursue claims under its $1.25 billion of insurance coverage, a person familiar with the matter said earlier this month.The company referred to the shutdown of the refinery as a suspension, and said in the statement it will “work on a comprehensive resolution with its stakeholders and insurers in the weeks ahead with the goal of rebuilding the damaged facilities.”(Updates with crude supply in sixth paragraph, insurance coverage in eighth paragraph)\--With assistance from Niluksi Koswanage, Finbarr Flynn, Barbara Powell and Allison McNeely.To contact the reporter on this story: Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.netTo contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, David Marino, Mike JeffersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- Philadelphia Energy Solutions filed for bankruptcy protection and reached a financing agreement with debt holders as the fuel-making company grapples with the aftermath of a June explosion and fire at its oil refinery that forced it to shut operations.

The company submitted Chapter 11 petitions at the U.S. Bankruptcy Court for the District of Delaware on Sunday. It also entered into a proposed debtor-in-possession financing agreement with holders of its outstanding term loan debt for up to $100 million, the company said in a statement.

The moves provide the company “with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations,” Chief Executive Officer Mark Smith said in the statement.

It will be the company’s second trip to bankruptcy court in less than two years, after emerging from Chapter 11 in August 2018. Estimated liabilities for this round are as high as $10 billion, according to the recent filings. The East Coast’s largest oil refiner said in June that it was dismissing more than 1,000 workers and shutting its plant, which could process 335,000 barrels of crude oil a day. There’s been little impact on gasoline prices in the eastern U.S. from the fire, with European refiners filling the gap.

A unit of Dallas-based Trinity Industries Inc. holds the largest unsecured claim, of almost $4.1 million, the court filings show. CSX Transportation Inc. and BNSF Railway Co. are the next biggest, at $3.9 million and $3.5 million, respectively.

Last month, a leak at an alkylation unit, which is used to make high-octane gasoline, triggered explosions and fire that stopped the refinery’s Girard Point section. The Point Breeze section -- which had been running at a reduced rate and was on track to run out of crude by Sunday night -- received about 500,000 barrels of crude over the weekend, enough to keep operating for another 6 days, according to a person familiar with the matter.

However, the company has told some employees it plans to shut the plant Tuesday, according to a different person.

The loan would allow the company to shut down safely, after which it would pursue claims under its $1.25 billion of insurance coverage, a person familiar with the matter said earlier this month.

The company referred to the shutdown of the refinery as a suspension, and said in the statement it will “work on a comprehensive resolution with its stakeholders and insurers in the weeks ahead with the goal of rebuilding the damaged facilities.”

(Updates with crude supply in sixth paragraph, insurance coverage in eighth paragraph)

--With assistance from Niluksi Koswanage, Finbarr Flynn, Barbara Powell and Allison McNeely.

To contact the reporter on this story: Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, David Marino, Mike Jeffers

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.