Swiss-based refiner Petroplus Holdings is struggling to avoid bankruptcy, after credit lines have been gradually withdrawn since late December.
With three out of five refineries already idle and the two others working at minimum levels and no indication banks are ready to extend lending, the company’s situation seems only to be worsening.
The crisis at Petroplus, Europe’s largest independent refiner, started when it disclosed that its lenders, a group of 13 international banks, had refused to renew a $1 billion (€0.8 billion) credit facility. After several quarters of losses, the company badly needed this financing to supply its refineries with crude oil.
Since then, the company has been negotiating with its banks, which include Societe Generale, ING Groep, BNP Paribas, Rabobank and Natixis, to open the credit tap to little avail, the CEO Thursday told reporters in a rare public appearance.
‘Our main concern is for the 2,500 employees of the group, which is why we want to make everything possible to avoid filing for bankruptcy,’ CEO Jean-Paul Vettier said after a meeting with top French government officials.
French Industry Minister Eric Besson said banks had eventually agreed to finance the company for a few days to allow the acquisition of crude.
The company is in the process of idling its refineries located in Petit-Couronne in France, in Cressier in Switzerland and in Antwerp in Belgium, while the other two in Caryton in the UK and Ingolstadt in Germany are still operating though at a slower rate than usual.
A few hours after the CEO comments, Petroplus, which has reported a $415 million net loss during the first nine months of 2011, said other credit lines worth $1 billion were also blocked. According to traders and analysts estimates, the company might be running out of cash.
Petroplus’s woes highlight the situation of the industry in Europe, where refiners are already grappling with weak demand, high crude prices, thin margins and rising competition from refiners in Asia and the Middle East.
During the same press conference, Vettier said the company was seeking other alternatives such as a support from an oil producing company he wouldn’t name that could bring crude and financing.
An oil company could bring a temporary support, said Roy Jordon, downstream consultant at Facts Global Energy, as a way to secure supply chain for its petrol stations.
Oil majors have been divesting from the oil refining business for several years when they found out that oil drilling gave better returns on capital and they are unlikely to expose themselves to that business again, he said.
Still, Petroplus might eventually be rescued though probably after being downsized significantly.
Banks might eventually agree to refinance Petroplus, if only to recover some of the money they still are owed, Jordan said. Banks might ask Petroplus to close the loss-making plants and focus on the few competitive ones. A last minute support might come from politicians. The Petit-Couronne refinery was last week visited by French presidential candidates, who promised support to the 550 workers and Industry Minister Besson will meet with unions on Monday afternoon. The government’s priority is to maintain activity at the refinery, he said.
Petit-Couronne would be the fourth refinery to close in France since 2010 and the government would surely prefer avoiding a nasty conflict with heavily unionized petrochemical workers.
However, so far the French government has been timid. French Finance Minister Francois Baroin said the government was mediating between the company and the banks though refused to answer when asked whether the government would put money on the table.