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TPC Group Inc. – Houston-Based Petrochemicals Group Files Chapter 11 with $1.3bn of Funded Debt with 78% (plus) Support of Noteholders; Looks to Shed $950mn of Prepetition Debt and Resolve Port Neches Explosion Liability


June 1, 2022 – TPC Group Inc. and seven affilliated debtors ("TPC" or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 22-10493 (Judge Craig T. Goldblatt). The Debtors*, "a global leader in providing a diverse range of quality products to chemical and petroleum-based companies worldwide," are represented by Robert J. Dehney of Morris, Nichols, Arsht & Tunnell LLP. Further board-authorized engagements include: (i) Baker Botts L.L.P. as general counsel, (ii) Simpson Thacher & Bartlett LLP as special finance counsel, (iii) FTI Consulting as financial advisors (and to provide Robert A. Del Genio as Chief Restructuring Officer), (iv) Moelis & Company LLC as investment bankers and (v) Kroll Restructuring as claims agent.

The Supporting Noteholders are advised by Paul Hastings LLP and Evercore. Eclipse Business Capital LLC is advised by Goldberg Kohn Ltd.

The Debtors’ lead petition notes between 5,000 and 10,000 creditors; estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn (funded debt of $1.241bn). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) U.S. Bank National Association ($567.0mn deficiency claim in respect 0.5% secured notes due 2024), (ii) Formosa Plastics Corporation ($12.1mn trade debt claim) and (iii) Chevron-Phillips Chemical Company LP ($9.7mn trade debt claim). The Debtors top-30 unsecured creditors list notes18 unsecured creditors as having claims over $900k and 12 unsecured creditors with undetermined, litigation-based claims.

*TPC was acquired in 2012 by private equity firms First Reserve and SK Capital.

In a press release announcing the filing, the Debtors advised that: “The Company intends to use the proceedings to implement a financial restructuring with the support of a majority of its secured noteholders that will deleverage and recapitalize the Company’s balance sheet and definitively address other legacy liabilities. The Company expects to continue its operations uninterrupted throughout the process.

In connection with the Chapter 11 filings, the Company and certain of its affiliates entered into a Restructuring Support Agreement (as amended, the 'RSA' [attached to Docket No. 27]) with an ad hoc group of holders of approximately 88% of the Company’s $205.5 million outstanding 10.875% secured notes due 2024 and approximately 78% of the Company’s $930 million outstanding 10.5% secured notes due 2024 (the 'Supporting Noteholders') and the Company’s equity sponsors (the 'Sponsors'), among others. The RSA locks in the support of the Supporting Noteholders and Sponsors and establishes the framework for the Company’s restructuring, which, on emergence, is expected to resolve all tort liabilities arising from the Port Neches facility incident and eliminate from the Company’s balance sheet over $950 million of the Company’s approximately $1.3 billion of secured funded debt. The transactions contemplated by the RSA, once consummated, will result in the Company emerging from bankruptcy with a significantly enhanced liquidity profile by providing for capital infusions in the form of: 

  • $450 million in connection with two rights offerings and $350 million in exit notes, all of which will be backstopped by certain of the Supporting Noteholders, subject to the terms and conditions set forth in the RSA; 
  • a $323 million delayed draw debtor-in-possession financing facility provided by certain of the Supporting Noteholders, which includes up to $85 million of new money to support the operations of the Company and help fund the restructuring process, subject to customary conditions; and  
  • a $200 million asset-based revolving debtor-in-possession facility provided by Eclipse Business Capital LLC and its affiliates, with the Company’s option to convert such facility into an exit asset-based revolving facility, subject to customary conditions."

Chairman, President and Chief Executive Officer of TPC Group, Edward J. Dineen commented: “…a series of unprecedented events including the COVID-19 pandemic, supply chain issues, commodity price increases, higher energy costs and operational challenges resulting from 2021 Winter Storm Uri, and the explosion at our Port Neches plant in November of 2019 have caused financial strain for the Company…We have undertaken many efforts to address the impacts of these events and preserve liquidity, which has given us the necessary time to consider the best path forward for our business and our stakeholders. We are confident that through this process, we will bolster our liquidity, substantially improve our debt position, and definitively resolve the liabilities associated with the Port Neches facility incident.” 

DIP Financing (DIP term sheet attached to Docket No. 27)

DIP Term Loans. The Debtors have commitments for debtor-in-possession ("DIP") financing considting of (i) up to $85.0mn of new money term loans and (ii) a dollar-for-dollar roll-up of prepetition senior priority notes. GLAS USA LLC is to serve as administrative agent and GLAS Americas LLC as collateral agent.

DIP ABL Revolving Facility. The Debtors also have commitments to borrow up to $200.0mn consisting of revolving loans, swingline loans, and/or to have letters of credit issued ( together, the “ABL DIP Revolving Facility”). Eclipse Business Capital LLC. is to serve as administrative agent and as collateral agent.

Prepetition Capital Structure

As of the Petition date, the Debtors have approximately $1.241bn in aggregate principal amount of secured funded debt, as follows:

Events Leading to the Chapter 11 Filings

In a declaration in support of first day filings (the “Del Genio” Declaration), Robert A. Del Genio, the Debtors’ (de facto) CRO provides: “On November 27, 2019, an explosion occurred at a BD processing unit at the PNO Facility. The explosion and subsequent fires resulted in the complete shutdown of all production at the PNO Facility. Production at the PNO Facility remains shut down to this day.

The PNO Incident directly resulted in the loss of approximately half of the Company’s historical crude C4 processing capacity. Following the PNO Incident, the PNO Facility was repurposed into a storage terminal. The Company terminated the employment of over sixty employees as part of a reduction in force initiative following the PNO Incident. The Company also incurred significant expenses related to legal and regulatory compliance, health and safety efforts, and restoring storage and terminal capabilities at the facility.

Following the PNO Incident, multiple federal, state, and local government agencies initiated full-scale investigations of the PNO Incident. The Company has fully cooperated, and continues to do so, with each agency’s respective investigations, assessments, and requests for information.

Voluntary Claims Program. Promptly following the PNO Incident, the Company established a claims center to deal with and expedite community claims regarding
evacuation expenses, damages to property and debris removal. Since that time, nearly 19,000 evacuation claims have been processed and paid to affected residents and over 5,700 property claims have been resolved. As of the Petition Date, the Company has paid settlements in the aggregate amount of approximately $134.5 million on account of PNO Claims.

Civil Actions. Approximately 190 private civil actions related to the PNO Incident are pending in Texas state court. The plaintiffs in those actions assert a variety of claims against certain of the Debtors, certain of the Sponsors, and certain other entities., Nalco Co., LLC, an industrial air and water solutions company, Suez WTS USA, Inc., an industrial air and water solutions company, and Ingenero, Inc., an engineering services provider. The causes of action include negligence, gross negligence, nuisance, and trespass. To date, although some discovery has taken place, no claim has proceeded to trial.

Given the voluminous nature of the claims at issue, the Company moved the State of Texas’ Multi-District Litigation Panel ('MDL Panel') to transfer civil cases to a single court for pretrial purposes to limit inconsistent rulings and excessive and duplicative discovery. The MDL Panel granted the Company’s motion to transfer, designating the Honorable Judge Courtney Arkeen of the 128th Judicial District Court of Orange County as the pretrial judge assigned to the cases. The actions emerging from the PNO Incident were assigned to Multidistrict Litigation under Cause Number A-2020-0236-MDL (the 'MDL').

Over 7,000 individual plaintiffs have claims pending in the MDL and approximately 322 individual plaintiffs have cases pending in Jefferson County and Harris County, Texas which have not yet been dismissed or abated.

Over the past two years, the Debtors’ business and liquidity has been impacted by several adverse events in addition to the PNO Incident. These include the 2020 oil and gas market crash, the COVID-19 pandemic, Winter Storm Uri (and lingering effects on equipment), a shutdown of parts of the HNO Facility (for portions of September through November 2021) to repair boilers that supply steam to various part of the HNO facility, and, most recently, the liquidity impact of trade credit contraction."

About the Debtors

According to the Debtors: “TPC Group, headquartered in Houston, is a leading producer of value-added products derived from petrochemical raw materials such as C4 hydrocarbons, and provider of critical infrastructure and logistics services along the Gulf Coast. The Company sells its products into a wide range of performance, specialty and intermediate markets, including synthetic rubber, fuels, lubricant additives, plastics and surfactants. With an operating history of more than 75 years, TPC Group has a manufacturing facility in the industrial corridor adjacent to the Houston Ship Channel and operates product terminals in Port Neches, Texas and Lake Charles, Louisiana.”

Corporate Structure

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The post TPC Group Inc. – Houston-Based Petrochemicals Group Files Chapter 11 with $1.3bn of Funded Debt with 78% (plus) Support of Noteholders; Looks to Shed $950mn of Prepetition Debt and Resolve Port Neches Explosion Liability appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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