×

EXCLUSIVE-Philadelphia oil refinery taps debt restructuring adviser -sources

(Adds background on company and oil market)

Aug 1 (Reuters) - Philadelphia Energy Solutions LLC, the owner of the largest U.S. East Coast oil refining complex, has hired an investment bank to help tackle its debt burden, as it continues to struggle with low profit margins, people familiar with the matter said on Tuesday.

The company's latest woes come five years after private equity firm Carlyle Group LP and Energy Transfer Partners LP's Sunoco Inc cut a deal, supported by tax breaks and grants, to rescue the refinery owner from bankruptcy.

Philadelphia Energy Solutions has tapped investment bank PJT Partners Inc for advice on dealing with its near-term debt maturities, including a $550 million loan that comes due in 2018, said the sources, who spoke on condition of anonymity because the hiring has not been made public.

"Philadelphia Energy Solutions is currently assessing its capital structure with the goal of improving financial flexibility in light of current market and regulatory challenges that have affected the company's profitability," Philadelphia Energy Solutions said in a statement to Reuters.

"We are working constructively with our lenders to find a solution that will enable us to move forward with the right financial foundation to support our business into the future. While these discussions are ongoing, operations are unaffected and it remains business as usual," the company added.

PJT Partners and Carlyle declined to comment, while Sunoco did not immediately respond to a request for comment.

Philadelphia Energy Solutions owns two refineries: Girard Point and Point Breeze. It processes approximately 335,000 barrels of crude oil per day and employs about 1,100 people.

East Coast refiners have been grappling with lower margins than their counterparts in other parts of the United States, largely because of their reliance on crude imports from West Africa and other markets. In addition, many of them have been struggling with costs imposed by renewable energy regulations.

Philadelphia Energy Solutions turned strong profits in 2014 and 2015, thanks to investments in rail terminals that allowed the refiner to bring in discounted Bakken crude oil in mile-long trains from North Dakota.

But the boom turned to bust by the end of 2015, as oil prices dropped and the discount for North Dakota crude that helped boost East Coast refining profits disappeared.

As a result, Carlyle, which invested $175 million in 2012 in exchange for two-thirds of Philadelphia Energy Solutions, last year withdrew its plans to take the company public.

Earlier this year, a New Jersey-based asphalt refinery, the largest in the United States, closed down, joining four other East Coast refineries that shut their doors in the past decade.

Philadelphia Energy Solutions borrowed the $550 million loan that comes due early next year in 2013 to finish capital projects and pay out dividends to Carlyle and Energy Transfer Partners. (Reporting by Jessica DiNapoli; Additional reporting by Jarrett Renshaw in New York; Editing by Chris Reese and Matthew Lewis)