Banks block Petroplus credit

Swiss oil refiner Petroplus Holdings AG had little by way of seasonal cheer to offer investors as it greeted the reopening of the Swiss Stock Exchange on Tuesday, December 27 with the news that its banks had blocked about $1.1 billion of uncommitted lines under a revolving credit facility.

The action by the Zug-based company's international banking syndicate effectively cut off its crude supplies, threatened its future as a going concern and made it a possible takeover target.

The syndicate, which includes the Swiss banks UBS AG, Credit Suisse and the Waadtländer Kantonalbank, appears to have lost patience with the company after four years of losses, and a second breach of its banking covenants. The company posted a net loss of $106.9 million on revenues of $20.74 billion in 2010. Losses in the first nine months of 2011 (although not on a strictly comparable basis with the annual figure) totalled $413.3 million. For the same period last year the losses were $250.3 million.

In a regulatory statement, Petroplus said it would continue negotiations with the banks for a prompt restoration of the credit lines, and was evaluating additional strategic options to maintain operations in its European refining and marketing system.

Petroplus was a money-spinner for its former private equity owners, Carlyle Group and Riverstone Holdings LLC, which took a 500% return on their investment when they brought the company to market with a Swiss francs 2.52 billion ($2.7 billion) IPO in 2006.

But Petroplus has amassed debts in the interim, splashing out on refineries in a series of deals, some of them followed by closure or expensive modernization. It now boasts plants in Germany, France, Belgium and the U.K. as well as a refinery at Cressier in Switzerland. The company is Europe's largest independent refiner, with a throughput capacity of about 667,000 barrels per day, although actual daily purchases are closer to 500 mbd. At present, its crude oil purchases cost it about $50 million every day. Net debt at the end of September was $1.53 billion.

By late afternoon Wednesday, the company's shares were trading in Switzerland at Sfr 1.71, down 7.57% on Tuesday's closing price of 1.74 and 49.8% compared with the closing price of Sfr 3.43 on December 22, the last day before the share began to plunge.