Engineering News

Big West's Creditors Hopeful They'll Be Paid
February 08, 2010

Creditors owed millions of dollars by the Big West oil refinery are cautiously hopeful they will get paid since learning that an Israeli company has submitted a bid to buy the bankrupt company.

"We weren't banking on a sale happening, but then the bid came, so you never know," said Chad Hathaway, owner of Hathaway LLC, a small oil producer based in Bakersfield, Calif.

Prior to Big West of California LLC's December 2008 Chapter 11 bankruptcy filing, Big West had been Hathaway's only customer. ConocoPhillips softened the blow considerably by picking up that business, but Big West still owes Hathaway about $600,000.

In its bankruptcy filing, the refinery at 6451 Rosedale Highway showed 200 to 999 creditors and liabilities of $500 million to $1 billion.

It's not clear who, if anyone, will be on the hook for that.

"We filed our claim with the Flying J case," said Michael Abril, an attorney for three creditors. "Their lawyers are now trying to cleanse the docket to make a distinction between Flying J creditors and Big West creditors, so of course we're trying to figure out what the sale of Big West would mean to us."

Bankrupt Flying J Group, the refinery's parent company based in Ogden, Utah, in July announced it had entered into a preliminary merger agreement with Knoxville-based Pilot Travel Centers LLC.

Pilot said it would be inappropriate to comment until the merger is completed.

Flying J also declined to comment, as did Dallas-based Alon Energy USA Inc., a unit of Alon Israel Oil Co. Ltd. The company owns four crude oil refineries in California, Louisiana, Oregon and Texas.

Alon on Tuesday announced it had offered to pay $40 million for Big West, plus the fair market value of inventory and the assumption of environmental cleanup obligations. A 250-acre buffer parcel of property was not included.

The largest unsecured creditor at the time of the filing was Zions Bank in Utah, owed $85.8 million. A bank spokesman said Friday its outstanding loan had been sold to an investor group that he declined to identify.

Debts to unsecured creditors aren't backed by land, buildings or other collateral.

Berry Petroleum Co., which moved headquarters from Bakersfield to Denver two years ago, was the third largest creditor, owed $26 million. Berry officials did not returns calls Friday.

Most of the largest firms owed unsecured debts are oil companies.

Hathaway said several weeks ago, hedge fund companies and others who invest in bankruptcy debt were offering creditors 65 cents on the dollar for the balance Big West owed them.

Since Tuesday, the offers have shot up to 85 cents on the dollar, Hathaway said.

"That tells me somebody thinks we're gonna get paid at some point," he said.

Hathaway is holding out for now, because he wants the entire balance he is due.

Attorney John Kim of the Los Angeles office of law firm Nossaman LLP represents six crude suppliers Big West owes money.

It will take a while to sort out how much money is even available to split up because transaction costs will have to be subtracted from the proceeds of any sale, he said.

"We don't know what those costs are going to be or what the timing is going to be," Kim said. "There are so many moving parts to this."

But the fact that there's a bidder at all presents a glimmer of hope, he added. "I think this is an exciting development for Bakersfield," Kim said.

Source: The Bakersfield Californian

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