Hovensa enters deal for sale of St. Croix refining assets, files for bankruptcy

Hovensa LLC, the joint venture of Hess Corp. and Petroleos de Venezuela SA (PDVSA), has entered a deal to sell terminal assets connected to its idled 500,000-b/d refinery on the island of St. Croix, US Virgin Islands (OGJ Online, Jan. 18, 2012).

As part of the deal, Hovensa has agreed to sell its St. Croix terminal operations for $184 million to Limetree Bay Holdings LLC (LBH), an affiliate of ArcLight Capital Partners LLC, Hovensa said.

The transaction would be completed as part of the Chapter 11 Section 363 process under Hovensa’s voluntary Chapter 11 bankruptcy proceedings in the US Bankruptcy Court for the District of the Virgin Islands, which Hovensa filed due to insufficient liquidity to complete any asset sales on its own.

The Chapter 11 bankruptcy proceedings as well as a related Chapter 11 plan would create a court-supervised sale process for the company’s terminal holdings and specify what will happen to the remaining St. Croix assets in a process designed to maximize asset sale values as well as expedite creditor recoveries, the company said.

Proceeds from the terminal assets sale will be used to repay Hovensa’s creditors, including its senior secured lender, the government of the USVI, to which the company owes $40 million as part of a settlement involving damages to natural resources, Hovensa said.

The sale also would enable the restart of Hovensa’s storage terminal operations, which shut down in February 2015 following a December 2014 vote by the 30th Legislature of the USVI to quash the company’s proposed sale of the refinery to Atlantic Basin Refining Inc. (OGJ Online, Nov. 14, 2014).

Under the Chapter 11 Section 363 process, however, any competing buyer has a right to improve upon the current sale agreement with LBH using court-approved bid procedures, with bidders allowed to propose purchase of the terminal business or purchase of Hovensa’s entire business, the company said.

Conclusion of any proposed asset sale further will require the negotiation of an operating agreement with USVI Gov. Kenneth Mapp, approval of the operating agreement by the USVI Senate, and final approval by the bankruptcy court, Hovensa added.

A timeframe for the sale of Hovensa’s St. Croix terminal assets was not disclosed.

Alongside Hovensa’s move to liquidate assets, the USVI government already has filed a lawsuit against Hess alleging the joint owner abandoned operation of the refinery nearly a decade before fulfilling its legal obligations.

The suit is seeking damages of at least $1.5 billion, a figure that includes at least $150 million/year in benefits to Virgin Islanders over the 10-year period from 2012 to 2022 that Hess was obligated under Virgin Islands law to continue operating the refinery, according to a series of releases from the USVI government.

Under Virgin Islands law, those damages could triple, according to the 31st Legislature of the USVI.

Contact Robert Brelsford at rbrelsford@ogjonline.com.

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