Pilot Travel Centers LLC is buying the Flying J travel plazas in a cash [image-nocss] and stock deal valued at $1.6 billion. The revamped Flying J will no longer be a retail player and will consist primarily of the North Salt Lake City, Utah, Big West Oil refinery and Transportation Alliance Bank. In addition, Flying J will hold an 11.7% equity stake in Pilot.
"I'm happy to confirm this plan," Walrath said at a hearing in the U.S. Bankruptcy Court in Wilmington, Del.
"We are no longer in Chapter 11 protection, but we do have to wait 10 business days for it to be effective," Flying J CEO Crystal Call Maggelet told the Tribune. Maggelet will continue as president and CEO, said the report, and the company's headquarters will remain in Ogden, Utah.
The reorganization plan allows Flying J to repay all creditors in full in cash, according to a document that John Boken, Flying J's chief restructuring officer, filed with the court last week.
"This is a throwback," Flying J attorney David Eaton told Dow Jones, describing the company's Chapter 11 case as an old-style reorganization that preserves the business and keeps creditors happy. He is with Kirkland & Ellis LLP. Bills including a $400 million term loan will be paid in full, with interest, from the sale proceeds, said the report.
Flying J's creditors and equity stakeholders, for the most part, supported the company's plan, and Tuesday's confirmation hearing lasted less than two hours, the report added. Eaton said Flying J hopes to come out of bankruptcy within weeks.
The company entered bankruptcy in December 2008, as oil prices headed south and the credit markets froze. It will be leaving bankruptcy as a smaller operation, still in the hands of the founding Call family and other equity stake holders.
A series of sales during Flying J's bankruptcy case raised enough to allow the company to pay all its bills in cash. The Pilot deal was the largest, said the report.
The travel plaza business includes rest stops, motels, retail operations and truck-service centers. The Federal Trade Commission (FTC) is requiring Pilot to sell 24 locationsto Oklahoma City-based Loves Travel Stops & Country Stores Inc.to relieve concerns the combined Pilot and Flying J travel plaza operation would have too much sway in the market for long-haul truck fleet business.
Flying J's 200-well oil-production business was sold to a unit of El Paso Corp. for more than $100 million and its 700-mile Texas pipeline was sold to Magellan Midstream Partners LP for $326 million.
(Click here for previous CSP Daily News coverage of the Flying J bankruptcy and the deals resulting from it.)
Cash is being used to cover the company's debts, the report said. Walrath overruled an objection by those who sued Flying J for allegedly selling them "hot fuel," or fuel at temperatures higher than the industry standard of 60 degrees Fahrenheit. The hotter the fuel, according to the controversial theory widely discredited by the travel center industry, the more volume it takes up and the less energy is produces.
Flying J said it agreed to cover hot fuel claims in its reorganization plan, to the extent they prove out. Additionally, Pilot is taking on some of the liability as part of its deal to buy the travel plazas. A series of lawsuits have been partially certified as a class action by a court in Kansas, and the litigation will proceed unhampered by Flying J's bankruptcy, the judge noted.
The Big West Oil refinery is capable of producing 30,000 barrels of fuel per day. The company said the operation was "thriving and profitable" before the Chapter 11 filing. The bank that will remain with the reorganized company offers a "Frequent Fueler" credit card and other financial services to truck drivers.
Just two years ago, Flying J was the 16th-biggest privately held U.S. company, according to Forbes magazine.
Prior to the sale of its travel centers and other operations, Flying J employed 11,600 workers. The company recorded sales of $8.4 billion for its fiscal year ending January 31. It was founded in 1968 by Jay Call as a small petroleum marketing company with just four gas stations, said the report.
(Click here for Pilot Flying J's merger website.)
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