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Bargain-hunters hover over remains of Petroplus

Following the recent bankruptcy of the Zug-based Petroplus Holdings AG, other oil-refining companies are already weighing up the shut-down refineries with an eye to getting a bargain.
 
On Tuesday the District Court of Boudry in the canton of Neuchatel approved further insolvency procedures with regard to the company, opening the way forward for sales negotiations. According to Thierry Grosjean of the Neuchatel cantonal government, there are between 5 and 10 companies interested in purchasing the company's only Swiss oil refinery at Cressier, with negotiations with three of them already at an advanced stage.
 
The French minister of industry Eric Besson also mentioned that there were several possible purchasers of the refinery in Petit Couronne near Rouen. It is thought the family-owned Klesch Group, which is headquartered in Geneva, may be interested in buying Petroplus' refineries in France, Germany and England, though no mention was made of the plant at Cressier in the canton of Neuchatel. Then the Azerbaijani Soccar company has also been mentioned as a possible purchaser of one or more of Petroplus' refineries.
 
Last week Brigitte Umbach-Spahn and Karl Wüthrich were appointed as lawyers responsible for the provisional administration of the company. Both are well known from the time when Swissair went into administration in 2001.
 
The court is also expected to nominate two other lawyers to monitor the activities of the facility in Cressier and the French authorities have announced that the circumstances leading to the bankruptcy are to be thoroughly investigated, with possible legal consequences for Petroplus. It is not yet sure whether there will be a similar investigation in Switzerland.
 
Was the bankruptcy of Petroplus an inevitability? Not according to Hans-Jakob Heitz, a Zurich-based lawyer and an expert in shareholders' rights. He criticised the role of the banks who stopped the flow of money into the company. "It is always the lawyers who come to a decision too quickly. They can often act in a destructive way when they really need to look more closely at the economic aspects in such cases. After all, every bankruptcy involves job losses and this results in a greater burden on the taxpayers."
 
Heitz continued, "The case of Petroplus is not unlike that of Swissair, when all the company needed was more time to reach an agreement with its creditors. This could have saved the company from bankruptcy and could have benefited shareholders in the long term." As an example of the right way to go about saving a company, Heitz mentioned the case of the Union Bank of Switzerland in autumn 2008. "In effect the bank was finished, but it was saved from bankruptcy with money from the taxpayer, supported by the Swiss National Bank. Now we know that this intervention was worth the price and many jobs were able to be saved."
 
Heitz went on the cite how American companies or their creditors can file for so-called Chapter 11 protection. This means that the debtor remains in control of the business which is then subject to the supervision and jurisdiction of a court. "Many companies such as American Airlines and General Motors have made use of this, enabling them to start up again after re-structuring." Heitz also fears that the administration proceedings in relation to Petroplus will be expensive and drag on for years.
 
And what actually was the cause of Petroplus' demise? Gregor Greber of the Zug zCapital asset management company said that it failed as a result of its own lack of ability. "We have been criticising the company's strategy of acquiring too much with borrowed funds for years." 
 
However Martin Schreiber, analyst at the Zuger Kantonalbank, said that the company failed as a result of the difficult market conditions, with the prices in the oil trade becoming increasingly under pressure since the middle of 2011. As a result of the Libyan crisis, global production of crude oil fell by 2%, causing changes in the supply and demand in Europe in particular. This all led to an increase in the purchase price of oil for the company.
 
Greber maintains however that it was not the crisis in Libya which brought the company to its knees. "The management should have been prepared for emergencies. In effect the company was not profitable enough to bear the costs of so much borrowed capital." What is more, he feels the board of management simply paid themselves too much.
 
 


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