- Limetree Bay Refinery Lenders ‘Opposed’ New Financing
- Filing for bankruptcy comes after the plant closes ordered by the EPA
July 12 (Reuters) – The owners of Limetree Bay, a Caribbean oil refinery plagued by cost overruns and regulatory issues, filed for bankruptcy on Monday after lenders were reluctant to invest new funds in the project .
In May, the Environmental Protection Agency ordered the temporary closure of the plant in St. Croix, U.S. Virgin Islands, following a series of fires and the release of noxious gases. These incidents contaminated local drinking water, closed a school, and prompted residents to complain of respiratory problems and foul odors.
The shutdown came amid a row between the plant and the EPA over who was responsible for installing the air monitoring systems. The EPA ordered the equipment installed and recently asked the company to stop releasing gas.
“Severe financial and regulatory constraints left us with no choice but to continue down this path, after careful consideration of all alternatives,” said Jeff Rinker, CEO of Limetree Bay, of the bankruptcy filing in a statement.
Late Monday, Limetree and its debtors sought court approval for up to $ 25 million in so-called debtor-in-use financing.
The requested facility would allow the parties to borrow $ 5.5 million immediately, with approval for the remainder of the amount in subsequent hearings.
Limetree Bay, which entered a long-awaited restart earlier this year, has been the costliest effort in nearly a decade to expand oil refining capacity in the Western Hemisphere. It aimed to provide cleaner marine and other fuels, but the plan fell through after construction delays hit the COVID-19 pandemic, which reduced demand for all types of fuels.
More recently, lenders have objected to the plant’s call for new funds to complete the project, according to the director of EIG Global Energy Partners, the Washington-based private equity firm that runs the largest group. investors.
“EIG supports the company’s efforts to secure financing,” EIG Chairman Blair Thomas said in a statement, adding “to date major lenders have opposed” these efforts. The company and its partners became “the reluctant owners” earlier this year when its original sponsor stepped down, he said.
EIG and Limetree Bay “regret the impact the bankruptcy filing will have on the local community” and will endeavor to provide assistance to local residents, he said.
Westbourne Capital, an Australian investor who has provided a $ 700 million term loan, has the highest debt on the project and could decide the fate of the plant, according to a person familiar with the matter who has not been cleared. to speak to the media and refused to be identified. Westbourne did not respond to requests for comment.
ONCE A SUPERIOR REFINERY
Limetree Bay, formerly known as the Hovensa Refinery, was once the largest oil refinery by capacity in the Western Hemisphere. It was inactive in 2012, filed for bankruptcy three years later and was acquired in 2016 by Arclight Capital Partners and Freepoint Commodities who raised up to $ 3.5 billion in equity for the project, said people familiar with the matter.
Monday’s court records showed that former Bear Stearns chief executive Steven Pully had been appointed to negotiate with “several potential lenders” urgent funding that would allow the plant to go bankrupt. The documents did not specify whether Limetree Bay had obtained any commitments.
The project had liabilities of between $ 500 million and $ 1 billion and assets valued between $ 1 billion and $ 10 billion, according to documents filed with the U.S. bankruptcy court in Houston.
Among the top 30 unpaid suppliers holding more than $ 150 million were oil producer BP (BP.L) and construction and equipment suppliers Universal Plant Services, Elite Turnaround Specialists and Excel Construction.
The restart was delayed for over a year and was over $ 1 billion over budget as project managers discovered additional corrosion on idle equipment and had to replace more parts than originally planned. .
Investors had hoped to take advantage of an international mandate on marine fuel for clean air known as IMO 2020, but the restart of the 210,000 barrels per day facility quickly sparked complaints from residents. Reuters also reported that the facility also does not monitor sulfur dioxide as required by law. Read more
Reporting by Laura Sanicola and David Gaffen; written by Gary McWilliams; Additional reporting by Shubham Kalia; edited by Richard Pullin, Edwina Gibbs and Louise Heavens
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