NEW YORK: Finding a buyer for Philadelphia Energy Solutions’ oil refinery has grown urgent as the bankrupt company’s funds dwindle and no signs emerge that it is winning a fight for insurance payouts after a June blaze at the plant, according to court documents and bankruptcy experts.
Without access to the more than $1 billion in insurance coverage, selling the refinery has become one of the company’s only options to raise cash before being forced to liquidate.
At least three parties have potential proposals to buy the shut Philadelphia refinery, each with plans to reopen the 1,300-acre (5.3-square km) site with a mix of oil refining and alternative energy production, sources familiar with the plans said.
Initial meetings are scheduled between the prospective buyers and a collection of vetters over the next several weeks, but it is unclear how long it would take for any official bid to come together, the sources said.
PES was not available for comment on whether it had reviewed any of the proposals or how viable it considered them to be.
For the second time in less than two years, PES filed for Chapter 11 bankruptcy on July 21, exactly a month after fire and blasts destroyed an alkylation unit at the 335,000-barrel-per-day refinery.
PES shut its final crude unit in late July, and more than 600 workers are in the process of being laid off without severance pay or the option for continued health insurance.
The company has no prepackaged arrangement to restructure the business or income from running the refinery, the largest in the US Northeast, raising the likelihood it will be forced to liquidate.
“They’re playing a game against the clock,” said Christina Simeone, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, who wrote a report last year predicting the refinery would close by 2022 due to poor economics.
To emerge from bankruptcy, PES needs to tap into $1.25 billion in property damage and loss of business insurance coverage, according to court filings. So far, PES has been denied requests for payment, and at least one creditor has surfaced to fight for any future insurance proceeds. Seven others are objecting to PES’ bankruptcy plan.
It is unclear how much is left of the initial $65 million bankruptcy loan PES secured at the start of the process, which is needed to pay for attorneys, wind down the massive refinery complex, utility bills and salaries.
PES recently asked the court to retain law firm Kirkland and Ellis for $4.6 million and another firm for $1 million, according to court documents.
On Friday, the US Trustee appointed to the bankruptcy case objected to Kirkland and Ellis, saying the firm has represented PES’s largest equity holders in unrelated matters, creating a potential conflict of interest, court documents show. — Reuters