A bank dropped its objection on Tuesday to Philadelphia Energy Solutions Inc’s initial bankruptcy requests after the two sides struck an agreement over the terms of new financing.
PES filed for Chapter 11 bankruptcy protection on Sunday after a fire last month prompted it to close the largest refinery on the U.S. East Coast.
ICBC Standard Bank Plc, which finalized an intermediation agreement to buy PES’s crude and refined products last month, initially objected to the terms of the debtor-in-possession financing sought by PES because it did not give the bank priority over any insurance payouts stemming from the June fire that destroyed a section of the refinery. ICBC Standard, a joint venture between a South African bank and Chinese bank, said PES owes it more than $300 million in early termination fees and other costs, according to filings with the U.S. Bankruptcy Court for the District of Delaware. But the two sides struck a deal on the terms of the financing during a hearing on Tuesday in federal bankruptcy court in Delaware, according to a spokesman for the bank.
The hearing, which largely dealt with less complicated requests, was the first since the refiner filed for bankruptcy protection.
The fire tore through an alkylation unit at the Girard Point section of the refinery, scattering debris across nearby highways. PES said days later that it would have to shut the complex and lay off about 1,000 workers.
Nobody died in the blaze, which is currently under investigation by at least three federal agencies.
At the time of the fire, ICBC Standard said it had $1.6 billion worth of crude and products stored at the 335,000 barrel-per-day Philadelphia plant, and the bank has not been able to gain access to all of it.
PES in recent weeks attempted to tap in to $1.25 billion in property damage and loss of business insurance coverage, but its request was denied, the company said in court filings.
The refinery said that refusal forced it to enter Chapter 11 bankruptcy over the weekend. With the infusion of funds, PES said it could have kept the facility open, but instead it is in the process of draining the 1,300-acre site of its inventory and idling the facility.
“These insurance proceeds are the very heart of these Chapter 11 cases: the sooner the debtors (PES) can recover, the sooner the business can complete its recovery,” PES said in a filing, signed by its chief restructuring officer, Jeffrey Stein.
By the time PES filed for bankruptcy, the company had only $45 million of cash in deposit accounts, which was ICBC collateral. The funds were not enough to pay for the extraction of inventory or wind down the facility, PES said.
Instead of receiving an advance on its insurance payout, PES is seeking $100 million in debtor-in-possession financing from its current lenders to pay for the shutdown process, bankruptcy and other obligations.
(Reporting by Laila Kearney in New York; Additional reporting by Jarrett Renshaw in Philadelphia; Editing by Leslie Adler and Matthew Lewis)
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