BUSINESS

Europe's largest independent refiner files for insolvency

01/24/2012 09:04 EST | Updated 03/25/2012 05:12 EDT
LONDON - Swiss-based Petroplus Holdings, Europe's largest independent oil refiner, said Tuesday that it was filing for insolvency after failing to reach an agreement with its lenders on its $1.75 billion credit line.

Petroplus said the lenders had filed notices of acceleration, effectively placing the company in default, and appointed an administrator for the Swiss company's U.K. assets.

It is preparing to file for insolvency in Switzerland and other countries where it has subsidiaries. The company has refineries in Switzerland, France, Belgium, Germany and England.

Petroplus, which reported a net loss of $413 million in the first nine months of last year, said last week it had decided to sell the facility in France and might do same with the Swiss and Belgian sites.

"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," chief executive Jean-Paul Vettier said in a statement from company headquarters in Zug, Switzerland.

Trading in the Petroplus shares had been suspended on Monday. On Tuesday, they plummeted 84.4 per cent to 0.23 Swiss francs.

The company's troubles already have forced a halt to production at the Cressier refinery in northwest Switzerland, but that has not caused any disruption to the nation's fuel supplies.

Petroplus had announced on Dec. 30 that it would temporarily shut down the Petite Couronne, France; Antwerp, Belgium; and Cressier refineries in January "given limited credit availability and the economic climate in Europe."

The company was downgraded by Standard & Poor's late last year from B to CCC+.

In Britain, the Unite union said 1,000 jobs were at stake at Petroplus' Coryton refinery, which represents a tenth of Britain's refinery capacity and is a key supplier for the London area.

"This is a hammer blow for the people who work at the refinery in Coryton, who have been kept totally in the dark over the negotiations in Switzerland but have today received the news they most feared," said Richard Howitt, a member of the European Parliament who represents the area.

PricewaterhouseCoopers said it had been appointed administrator of the refinery plus two other Petroplus sites in Britain, a storage facility and a development centre.

"Our immediate priority is to continue to operate the Coryton refinery and the Teesside storage business without disruption while the financial position is clarified and restructuring options are explored," said Steven Pearson, one of the joint administrators.

"Over coming days we intend to commence discussions with a number of parties including customers, employees, the creditors and the government to secure the future of the Coryton and Teesside sites," he said.

Employees were working at the refinery as normal but no shipments of refined products were being made, a condition imposed by the lenders, Margrave said.

Refinery profitability has been squeezed as operating expenses and the cost of crude oil rose faster than the value of the products, and the economic slowdown in Europe has added to the pressure.

A survey by energy consultancy Wood Mackenzie in 2010 found that 29 of 96 refineries in the European Union did not generate a positive net cash margin.

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Geir Moulson in Berlin and Frank Jordans in Davos contributed to this report.