Print | Share | Reprint

Petroplus to file for insolvency

by Paul Whitfield | Published January 24, 2012 at 9:33 AM

Europe's largest independent refiner, Petroplus Holdings AG, said Tuesday, Jan. 24, that it is preparing to declare insolvency after talks with creditors broke down.

The Zug, Switzerland-based company announced the plan after lenders, which froze a $1.1 billion revolving credit facility last month, gave notification that they would push the refiner into default on $1.75 billion of senior notes and convertible bonds.

"The negotiations with the lenders under the revolving credit facility have not been successful and they have served notices of acceleration, commenced enforcement actions and appointed a receiver in respect of Petroplus Marketing AG's assets in the U.K.," Petroplus said. "The board of directors has resolved to prepare for a filing for insolvency or composition proceedings (Nachlassstundung) in Switzerland and will make the necessary filings as soon as possible."

Petroplus' woes are part of a wider malaise amongst European refiners, which have been losing money for years because of fierce competition. At the same time, many refineries are under pressure to raise cash to pay for upgrades to their processing technology in order to comply with new European Union environmental standards.

Petroplus lost $413.3 million in the first nine months of 2011, the last period for which figures are available. The company has three tranches of high-yield senior notes. The first tranche of notes, which have a face value of $600 million and pay 6.75% interest, is scheduled to mature in 2014. A further $150 million of convertible bonds, paying 4% interest, are due in 2015.

Some of the debt was accrued to fund a refinery buying spree while Petroplus was under the stewardship of previous owners Carlyle Group and Riverstone Holdings LLC. The PE companies exited their investment in an Sfr2.52 billion ($2.69 billion) IPO in 2006 that netted a roughly 500% return on their investment.

"We have worked hard to avoid this outcome, but were ultimately not able to come to an agreement with our lenders to resolve these issues given the very tight and difficult European credit and refining markets," Petroplus CEO Jean-Paul Vettier said in a statement.

Shares in Petroplus have been on a roller coaster ride in recent weeks as talks with the banks including UBS, Credit Suisse Group and Waadtländer Kantonalbank sputtered. The stock climbed 30% on Jan. 12 after the creditors freed some funds to allow it continue operations and the company said that it had reached an agreement for crude oil supplies that would allow it to maintain its English and German operations. Petroplus said last week that it would seek to sell its French, Belgian and Swiss refineries.

Those plants were to join a further six European refineries that are already on the market or being considered for closure, according to a Petroplus study published in December. An additional seven refineries are in the process of closing.

Barclays Capital analyst Amrita Sen thinks that the likely closing of 2 million barrels a day of Petroplus' refining capacity offers a "a light at the end of the tunnel" for a sector hobbled by excess capacity and squeezed profit margins.

"We would expect further closures of simple, non-profitable refineries in both the US and Europe as the year progresses. The net result could be one where the global refining picture looks more favourable towards the end of 2012 than it has over the past few years, albeit only just, given the wave of new capacity additions continuing to come onstream in China, India and the Middle East," Sen wrote in a Tuesday note.

Shares in Petroplus were suspended on Monday at SfR0.24, down 84% on their previous close. Based on that figure, the company's market capitalization is Sfr20 million.

-- Claire Poole contributed to this report.

Share:

Restructuring

Petroplus to file for insolvency

Free preview

Meet the journalists

Paul Whitfield

Correspondent: Paris

Movers & Shakers

Video

Coming back for more

Sectors