As the Jan. 21 deadline nears for the sale of Limetree Bay Refinery to West Indies Petroleum, St. Croix Energy has filed an emergency motion seeking to delay the transaction so it can appeal the auction process that led to the sale.
Additionally, the V.I. government on Tuesday filed a limited objection to the sale until it is assured it will be paid $7.5 million it says it is owed under its operating agreement with Limetree Bay Refining.
For its part, Limetree Bay Services on Wednesday filed a proposed order asking the judge to deny St. Croix Energy’s motion, following a hearing on the matter and other issues Tuesday. The judge has yet to render a decision, according to the court docket.
St. Croix Energy was initially declared the winner of an auction for the bankrupt refinery in November in the U.S. Bankruptcy Court for the Southern District of Texas, with a bid of about $20 million. However, Judge David Jones reopened the auction after Jamaica-based West Indies Petroleum appealed, saying its chief executive had intended to participate but was unable to when he needed emergency medical care.
Jones said at a hearing on Dec. 6 to weigh reopening the auction that he accepted “at face value that West Indies was an interested party” and that the company officer’s illness was not a maneuver to gain an unfair advantage.
West Indies Petroleum and Port Hamilton Refining and Transportation went on to win the reopened auction on Dec. 18 with a joint bid of $62 million, and St. Croix Energy Group was declared the backup-bidder, at $57 million. The deadline for the sale to close, originally set for Dec. 22, is now Jan. 21.
In a statement on Friday, its first since winning the auction, West Indies Petroleum said it will restart the refinery with a focus on environmental responsibility and a plan to eventually double production to 450,000 barrels a day.
The refinery encountered numerous problems since its restart by Limetree in February after being shuttered in 2012 by former owner Hovensa following several years of heavy losses. Hovensa declared bankruptcy in 2015. In May, the Environmental Protection Agency ordered the refinery shut down for 60 days due to toxic emissions that affected scores of neighboring properties. In June, Limetree announced it was closing indefinitely, and in July declared bankruptcy.
St. Croix Energy first objected to the sale to West Indies Petroleum in December but did not prevail in court. On Jan. 5, it filed the emergency motion for a stay of the sale pending its appeal of Jones’ orders reopening the auction.
St. Croix Energy alleges that while the winning joint bid was made in the name of West Indies Petroleum and a company called St. Croix Refining and Transportation, it was really by two entities not qualified by the court to participate: West Indies St. Lucia, the majority shareholder of WIP, and newly formed entity Port Hamilton Refining and Transportation.
“This bid was not the WIPL/SCRT Qualified Bid upon which the Order Reopening Auction was premised,” the motion states. Moreover, changing the closing date from Dec. 22 to Jan. 21 “was inconsistent with the premise on which the Court entered the Order Reopening Auction and the requirements of the then applicable Bid Procedures Order,” and materially changed the value of the bid, it states.
“Here, the Court reopened the auction based on a misunderstanding, if not misrepresentations, of the critical facts as to not only the purchase price being offered in the late bid, but also the identities of the purchasers, the required outside closing date and the circumstances surrounding the purported ‘sudden emergency’ that allegedly precluded WIPL from timely submitting a Qualified Bid,” the motion states.
The filing questions whether West Indies Petroleum’s claim that it could not take part in the original auction due to a medical emergency is in fact true. The company officer knew before the bid deadline of Nov. 12 that he was scheduled for surgery on Nov. 15, did not request the deadline be moved, and on the day the deadline expired he was performing his normal duties but made no arrangements to submit a deposit, the motion states.
“There was simply no evidence that WIPL ever intended to submit a bid by the Bid Deadline. Indeed, had it intended to do so, it would have wired the required deposit on Friday morning, and simply not have submitted the [Asset Purchase Agreement],” the motion states.
Separately, the V.I. government claims the most recent Notice of Designated Contracts did not list a cure claim for the operating agreement between it and Limetree Bay Refining.
“To the extent these monetary defaults are not promptly cured, the agreement may not be assumed and assigned,” the government said in its filing, listing quarterly payments outstanding since June totaling $7,534,247.
However, the government said in the objection that it supports West Indies Petroleum’s bid to restart the refinery.
“Despite this Limited Objection, the USVI fully supports the Debtors’ and Purchaser’s efforts to restart operations at the Refinery. The USVI intends to continue to negotiate in good faith and expect that the Parties will be able to present a consensual resolution to this matter before the date set for hearing before the Court,” it stated.