July 23, 2019 / 8:04 PM / 25 days ago

Chinese bank seeks denial of Philadelphia Energy Solutions bankruptcy plan

NEW YORK, July 23 (Reuters) - A Chinese bank asked a federal judge on Tuesday to deny Philadelphia Energy Solutions’ initial bankruptcy requests, arguing it should get priority over any insurance payouts after a June fire destroyed a section of the PES refinery.

ICBC Standard Bank PLC, which signed an agreement to buy PES’s crude and refined products just three days before the June 21 explosion and blaze, said PES owes it more than $300 million in early termination fees and other costs, according to filings with the U.S. Bankruptcy Court for the District of Delaware.

The fire tore through an alkylation unit at the Girard Point section of the refinery, the largest on the U.S. Eastern Seaboard, scattering debris across nearby highways. PES said days later that it would have to shut the complex and lay off about 1,000 workers.

Nobody died in the blaze, which is currently under investigation by at least three federal agencies.

At the time of the fire, the Chinese state-owned bank said it had $1.6 billion worth of crude and products stored at the 335,000 barrel-per-day Philadelphia plant, and the bank has not been able to get access to all of it.

PES in recent weeks attempted to tap into $1.25 billion in property damage and loss of business insurance coverage, but its request was denied, the company said in court filings.

The refinery said that refusal forced it to enter Chapter 11 bankruptcy over the weekend. With the infusion of funds, PES said it could have kept the facility open, but instead it is in the process of draining the 1,300-acre site of its inventory and idling the facility.

“These insurance proceeds are the very heart of these Chapter 11 cases: the sooner the debtors (PES) can recover, the sooner the business can complete its recovery,” PES said in a filing, signed by its chief restructuring officer, Jeffrey Stein.

By the time PES filed for bankruptcy, the company had only $45 million of cash in deposit accounts, which was ICBC collateral. The funds were not enough to pay for the extraction of inventory or wind down the facility, PES said.

Instead of receiving an advance on its insurance payout, PES is seeking $100 million in debtor-in-possession financing from its current lenders to pay for the shutdown process, bankruptcy and other obligations.

ICBC has asked the judge to reject the financing agreement, arguing that it would give the lenders an advantage over the company’s assets.

The Chapter 11 bankruptcy is the second for PES in less than two years. (Reporting by Laila Kearney in New York Additional reporting by Jarrett Renshaw in Philadelphia Editing by Leslie Adler)

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