HOVENSA: Sale of Container Port Contingent Upon Unconditional Release From Liability
Hess Corp’s Lorrie Hecker
CHRISTIANSTED – The owner of the mothballed refinery on St. Croix filed for chapter 11 on Tuesday, as part of a plan to sell its assets for $184 million to an affiliate of Boston private-equity firm ArcLight Capital Partners LLC.
The refinery, known as HOVENSA LLC, is a joint venture formed by Hess Corp. and Petróleos de Venezuela, the national oil company of Venezuela. It had warned of the bankruptcy Monday, the same day half-owner Hess was sued over the shuttering of the refinery.
The company said then that the sale and bankruptcy filing would allow the refinery to reopen “under the ownership of a proven and well-capitalized operator.”
The offer by ArcLight affiliate Limetree Bay Holdings LLC will be subject to higher bids at a bankruptcy court auction. Hovensa called the process “unavoidable” given its financial condition.
The bankruptcy filing came a day after the Virgin Islands government sued Hess Corp. for more than $1 billion over its closing of the refinery. The suit alleges a “pattern of misconduct” by Hess, saying the company stripped assets to leave the government holding the bag.
The suit was made under the Virgin Islands’ Criminally Influenced and Corrupt Organizations Act, or CICO, which allows for triple damages.
“We believe this suit is wholly without merit,” Hess spokeswoman Lorrie Hecker said Tuesday.
In its chapter 11 petition filed with U.S. Bankruptcy Court in the Virgin Islands, HOVENSA said it has between $100 million and $500 million in assets and more than $1 billion in liabilities. In a separate filing with the court, the company said its two owners would provide $40 million in bankruptcy financing to keep it afloat during the chapter 11 proceedings.
Even before the Monday suit and Tuesday’s bankruptcy, HOVENSA’s refinery had been in turmoil.
The Virgin Islands Legislature in a vote late last year ended Atlantic Basin Refining Inc.’s proposed purchase of the plant, which hasn’t been producing fuel since 2012. Atlantic Basin had struck a deal to buy Hovensa that was contingent on the extension of a special tax benefit for the refinery. Lawmakers voted 13-2 against the extension, effectively killing that sale.
The assets being sold by Hovensa include $40 million owed to the Virgin Islands government for natural resource damage. The company said proceeds from the sale will be used to repay creditors, with the government first on the list.
ArcLight, or another successful bidder at the auction, will need to negotiate a new operating agreement for the refinery, which would require approval by the government and a Virgin Islands bankruptcy judge.
Even though the South Shore refinery hasn’t produced fuel since 2012, the site had operated as a fuel import and storage terminal for the island. But soon after the sale to Atlantic Basin fell through, the company ran out of cash and eased customer storage operations. Its truck rack is still open.