An energy solutions company in another state recently decided that its monetary situation required it to take aggressive action. As a result, the company has filed for Chapter 11 bankruptcy protection. The oil refinery it owns supplies over 25 percent of the crude oil refining capacity on the East Coast of the United States, which includes the state of Massachusetts.
According to company officials, the bankruptcy-related restructuring would allow the company to become a brand-new company but with its same stakeholders. The company said a sale should erase between $300 million and $350 million worth of compliance costs, with chief lenders already providing support for the company’s plan. One such cost is the renewable identification numbers that the company had to purchase according to the federal government.
These numbers, called RINs, essentially led to an unintended and escalating burden amounting to double the company’s payroll costs and nearly 1.5 times its capital expenditures. The company said that if it did not have any RINs, it would be competitive with anybody worldwide. This is not the only company adversely impacted by RINs, which remain a major issue for multiple merchant refiners.
Sometimes companies in Massachusetts face financial struggles due to factors beyond their control. These may include poor economic conditions or government regulation, for example. However, filing for Chapter 11 bankruptcy may provide companies with the financial relief they so desperately need. In many cases, companies can continue to operate while working out their recoveries. In this way, they can protect their workers’ jobs and keep hope alive that they will not only survive but also thrive in the years ahead.
Source: bloomberg.com, “Biggest U.S. East Coast Oil Refinery Files for Bankruptcy“, Barbara Powell and Tiffany Kary, Jan. 22, 2018