Philadelphia Energy Solutions has filed for bankruptcy protection for the second time in two years and entered into a financing agreement for up to to $100 million with its current debtholders, the company announced on Sunday.
The financially troubled company announced it would shut its operations after a devastating fire and series of explosions last month at its South Philadelphia refinery. PES expected to stop processing crude oil this week. The incident damaged the refinery’s alkylation unit and cut revenues sharply, which forced PES to submit a Chapter 11 bankruptcy petition. The company expects to complete restructuring through the court process, according to a statement.
“Today’s agreement provides PES Energy with the additional financing and liquidity necessary to ensure we can safely wind down our refining operations and, with the support of our insurers and stakeholders, best position the company for a successful reorganization, the rebuilding of our damaged infrastructure, and a restart of our refining operations,” Mark Smith, chief executive officer of PES Energy, said in a press release.
The company will continue cooperating with federal, state and city agencies investigating the June 21 fire, and it has committed to extending pay for the majority of its 1,000 workers through Aug. 25. PES’s goal is to rebuild the damaged infrastructure and resume refining operations with the proposed debtor-in-possession financing provided by the Chapter 11 plan.
“The company expects to establish an orderly process for the evaluation of a range of potentially value-maximizing transactions in the weeks ahead and to work expediently with its insurers, stakeholders, and third parties,” PES said.
In 2012, Delaware’s Carlyle Group entered a joint venture with Sunoco to form Philadelphia Energy Solutions and rescue the 335,000-barrel-per-day refinery complex, with the help of federal and state grants. PES filed for bankruptcy in January 2018, citing the rising cost of a program that forces refiners that don’t blend ethanol to buy renewable fuel standard credits on the open market. In February of this year, Reuters reported the company was in financial trouble again, just six months after exiting bankruptcy. After the fire, analysts told StateImpact Pennsylania that finding a willing buyer for the refinery was unlikely.
The 1,300-acre site is also in the process of major environmental cleanup. Different companies have operated refineries there since 1866, with very little regulation until the 1970s. Both the soil and the groundwater are heavily contaminated. The plant was Philadelphia’s single-largest source of particulate pollution.
The Chapter 11 filing was made in U.S. Bankruptcy Court for the District of Delaware.