Hovensa LLC, a Caribbean oil refiner co-owned by Hess Corp., filed for bankruptcy protection following years of environmental litigation, plunging oil prices and increased competition.
Company managers tried to sell Hovensa last year, only to have a possible deal scuttled by Virgin Islands lawmakers, who refused to pass needed legislation, Chief Restructuring Officer Thomas Hill said in a court filing Tuesday in St. Croix.
The vote forced Hovensa “to restart its marketing and sale process,” eventually leading to the bankruptcy filing, Hill said.
Hovensa has been struggling financially since at least 2009. It began curtailing operations in 2012 and finally shut down this year.
The company said it plans to sell its assets at an auction overseen by a federal court.
Hovensa listed more than $1 billion in debt, including an unknown amount demanded by environmental regulators in the U.S., the Virgin Islands and Puerto Rico.
The company is half-owned by Hess and half by the Venezuelan state oil company, according to information compiled by Bloomberg.
Environmental regulators sued Hovensa in 2005, accusing it of contaminating drinking water and damaging wildlife and marine environment, according to court records. The company settled by promising to pay the Virgin Islands $43.5 million.
That lawsuit and an air-pollution case brought by the U.S. Environmental Protection Agency compounded financial problems brought on by falling oil prices and increased competition, Hill said.
Hovensa owns oil-storage tanks, the idled refinery and about 2,000 acres of land on St. Croix. At its peak, the company employed 2,500 people, or about one in four workers on the island.
From 2009 to 2011, Hovensa lost $1.3 billion and shut down all refining in 2012, while keeping open the oil-storage business, according to court papers. By this year, the company had ended storage operations as well.
Bondholders are owed about $1.86 billion on notes that matured in 2013 and aren’t backed by collateral.
Under a proposal that requires court approval, an affiliate of ArcLight Capital Partners agreed to make a $184 million bid at auction for Hovensa’s assets. Should no other offers come in, ArcLight would buy the assets.
An auction could raise enough money to pay, in cash, a $40 million debt owed to the government of the Virgin Islands related to the environmental settlement.
The case is In re Hovensa LLC, 15-bk-10003, U.S. Bankruptcy Court, District of the Virgin Islands (St. Croix).