On August 12, 2010, Caribbean Petroleum Corporation filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. Caribbean Petroleum imports and distributes petroleum products in Puerto Rico through a network of 184 service stations. This post will look at the events leading up to the company’s filing for bankruptcy, as well as what the company hopes to accomplish while in bankruptcy.
One of the first documents Caribbean Petroleum filed with the Bankruptcy Court was the Declaration of Nicolas Pena (the “Pena Declaration”), Chief Financial Officer of the Debtor. As stated in the Pena Declaration, Caribbean Petroleum’s major assets include a deep water dock in San Juan, Puerto Rico, a “tank farm” containing 48 multipurpose tanks and 28 tanks that hold liquid petroleum gas. In addition to the tanks and dock, Caribbean Petroleum owns six pipelines that connect the dock to the tank farm. The company’ s dock is the only on in San Juan harbor capable of servicing vessels up to 850 feet in length. Pena Decl., pp. 6 – 7.
Events Leading to Bankruptcy
On October 23, 2009, one or more of Caribbean Petroleum’s tanks exploded. The explosion was large enough to register at 2.8 on the Richter scale. The explosion and resulting fires destroyed 20 of Caribbean Petroleum’s storage tanks and damaged 12 more. Due to the explosion, Caribbean Petroleum lost 50% of its tank farm storage capacity and lost substantial amounts of fuel stored inside the tanks. The company experienced another setback when the EPA refused to allow it to use the non-damaged tanks until thorough inspections were completed. Pena Decl., pp. 13-14.
After the explosions, Caribbean Petroleum hired contractors to conduct clean-up and emergency response services at the site. The company’s lack of cash, however, limited its ability to complete the remediation of the damaged areas. Worse still, poor liquidity has hampered Caribbean Petroleum’s ability to purchase fuel for re-sale at its service stations. The result, as stated by the company’s CFO, is a “virtual shutdown” of operations. Pena Decl., p. 14.
Objectives in Bankruptcy
Caribbean Petroleum filed for bankruptcy hoping to conduct a sale of assets under section 363 of the Bankruptcy Code. Due to its current state of affairs, the company lacks financing or support from secured creditors to restructure and reorganize. In the weeks leading up to bankruptcy, Caribbean Petroleum entered into negotiations with its lenders and Astra Oil Trading whereby Astra would serve as a stalking horse bidder in a 363 sale. Pena Decl., pp. 22-23.
This bankruptcy proceeding is before the Honorable Kevin Gross. A copy of Caribbean Petroleum’s Petition for Bankruptcy is available here. A copy of the Pena Declaration is available here. Caribbean Petroleum is represented by Richards Layton & Finger.