Federal Judge Approves $40 Million Loan To HOVENSA
CHRISTIANSTED – A federal judge gave interim approval for $40 million loan to HOVENSA from its proposed new owners as bankruptcy proceedings over the future of the South Shore refinery began in U.S. District Court in Golden Rock on Thursday.
Some of the money is needed by HOVENSA to pay a skeleton crew of 140 staff that maintains the Estate Hope property. The proceedings are taking place two days after HOVENSA filed for Chapter 11 bankruptcy protection, saying it owes $1.86 billion to owners Hess Corp and Venezuela’s PDVSA.
Since the 500,000-barrel-per-day refinery was shuttered in January 2012 on mounting losses, HOVENSA has been struggling to pay its debts and obligations.
Those debts and obligations include a $40 million environmental fine filed by the Virgin Islands government and notes issued in 2012 to pay back its owners.
HOVENSA’s owners have told the bankruptcy court that they agreed to sell the company’s terminal and storage facilities to ArcLight Capital Partners LLC affilliate Limetree Bay Holdings LLC for $184 million.
Under that agreement, subject to court approval, Limetree would take on some of HOVENSA’s debts, which are 10 times greater than the price tag. HOVENSA said investment bank Lazard, Ltd. was advising it.
A previous attempt to sell the whole plant and restart the refinery failed last year after the Virgin Islands Legislature rejected the plan and expressed doubts about that buyer, Atlantic Basin Refining.
In February, the owners decided to idle the refinery’s 32-million-barrel storage terminal, which HOVENSA had rented out.
In its court filings, HOVENSA said it owed its owners more than $1.86 billion, including interest.
The company also said it had a loss of $1.3 billion between 2009 and 2011. Its island location and outdated power infrastructure left it hamstrung with high costs.
During that same period, cash-strapped PDVSA sold several overseas assets, including refineries and terminals in Europe and the United States.
Its latest sale was in June, when U.S. company PBF Energy, Inc. struck a deal to buy the Chalmette refinery in Louisiana, which is jointly owned with Exxon Mobil Corp.
HOVENSA’s restructuring officer underlined the importance of this new sale attempt in the middle of debts and lawsuits.
“If consummated, the sale transaction will generate proceeds sufficient to pay in full in cash the $40 million secured claim asserted by the government,” the court filing said.
HOVENSA was formed in 1998 between Hess and PDVSA to process Venezuelan heavy crudes. Each party has 50 percent ownership. It once employed 2,500 people, representing 25 percent of the St. Croix workforce.