Credit & Capital

Fire Forces Philadelphia Energy Solutions to File for Bankruptcy

The largest refinery on the U.S. East Coast was forced to file for bankruptcy protection after an explosion and fire last month.
Fire Forces Philadelphia Energy Solutions to File for Bankruptcy

Philadelphia Energy Solutions (PES), which operates the largest oil refinery on the East Coast, has filed for Chapter 11 bankruptcy protection after an explosion and fire in June.

Multiple giant explosions erupted at the refinery and closed the plant. One explosion was so large it was detected from space. Following the explosion, PES started shutting down the plant with no planned restart date. Almost 1,000 workers are being laid off.

It’s the second time PES has filed for Chapter 11 protection in the last 18 months. The refinery has struggled for years financially, and it last filed for bankruptcy in January 2018 to reduce debt.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

Along with the Chapter 11 filing, PES entered into a proposed debtor-in-possession financing agreement with holders of its term loan debt, providing for up to $100 million in new funding. It listed liabilities of between $1 billion and $10 billion, with up to 5,000 creditors, including railroad companies CSX and BNSF Railway, Baker Hughes, and Sunoco Partners Marketing & Terminals.

“The success of our plan is critical to energy supply and security for the region, the Commonwealth of Pennsylvania, and the City of Philadelphia,” PES chief executive officer Mark Smith said in a statement.

Smith said the company was cooperating with the federal, state, and city governmental agencies investigating the accident, which injured five workers.

PES Energy exited bankruptcy in August 2018 after restructuring $635 million of debt. It reported $149 million in cash on hand but blamed high costs associated with renewable fuel standards and its long distance from the shale oil hubs in West Texas for ongoing financial pressure.

The company previously said it would sell the refinery that was shut down.

Its two refineries in Philadelphia reportedly accounted for about 28% of the Northeast’s gasoline supply.

Reuters, citing two unnamed sources who were briefed on the company’s policies, reported PES could receive $1.25 billion in insurance payouts from the fire and the closing of the business.

Alvarez & Marsal is PES’s restructuring advisor, and PJT Partners is its investment banker. The proposed debtor-in-possession financing lenders are represented by Davis Polk & Wardwell and Houlihan Lokey Capital.

Eduardo Munoz Alvarez/Getty Images