Philadelphia Energy Restructuring and $120 Million DIP Financing Facility

Davis Polk is advising a group of prepetition term loan B lenders under a $550 million credit facility in the chapter 11 restructuring of Philadelphia Energy Solutions Refining and Marketing LLC and certain of its affiliates. On January 12, 2018, the term loan B lender group, which represents approximately 91% of the term loan B, and certain other parties entered into a restructuring support agreement with Philadelphia Energy for a comprehensive restructuring to be implemented through a prepackaged chapter 11 plan of reorganization. The restructuring contemplates that, upon consummation of the plan, among other things, prepetition term loan B lenders will equitize a portion of their claims in exchange for approximately two-thirds of the reorganized company’s equity and receive their pro rata share of one tranche of a first-lien unitranche exit facility. 

On January 21, 2018, Philadelphia Energy filed the prepackaged plan, together with its voluntary chapter 11 petitions, in the Bankruptcy Court for the District of Delaware. The prepackaged plan enjoys the support of more than 90% of Philadelphia Energy’s term loan B. The term loan B lenders are also providing a $120 million debtor-in-possession credit facility of $120 million that will convert into the senior-most tranche of the exit facility upon Philadelphia Energy’s emergence from bankruptcy. The DIP lenders will also receive a portion of the reorganized equity at emergence on account of their financing commitment. At the debtors’ “first day” hearing on January 23, 2018, the Bankruptcy Court approved the DIP Financing on an interim basis along with all of the debtors’ other requested first day relief.  

Philadelphia Energy owns and operates the Point Breeze and Girard Point oil refineries located on an integrated, 1,300 acre refining complex in Philadelphia. The 335,000 barrels per day of combined capacity makes Philadelphia Energy the largest refining complex on the Eastern Seaboard.

The Davis Polk restructuring team includes partner Damian S. Schaible and associates Aryeh Ethan Falk and Jonah A. Peppiatt. The finance team includes partner Joseph P. Hadley, counsel Christian Fischer and associate Matthew W. Levy. The corporate team includes partner Stephen Salmon and associate Bryan M. Quinn. The tax team includes counsel Ethan R. Goldman and associate Andrew Imber. Members of the Davis Polk team are located in the New York and Northern California offices.