"Even though Flying J today is a successful and historically profitable company, it faced near-term liquidity pressure from an unprecedented combination [image-nocss] of factors: the precipitous drop in the price of oil and the lack of available financing from our traditional sources due to disrupted credit markets," said J. Phillip Adams, Flying J president and CEO. "With this sudden and unanticipated inability to meet our liquidity needs, we regret that we had no other choice than a Chapter 11 filing to enable us to stabilize our financial base."
Spokesperson Peter Hill told CSP Daily News: "A fairly unique set of circumstances brought to bear fairly significant financial pressure in a short period of time. Over the past 45 days, the price of oil has fallen more than $100, and the credit facilities the company normally uses in the course of business to finance its operations are collateralized by the value of the oil in the pipeline and in [its] facilities, and that led to the situation. It's almost like a margin call with a brokerage account, where the banks know the price of oil, so essentially they're looking at that, and you combine that with the situation in the credit markets, and it led to a situation where the company didn't have a lot of options and didn't have a lot of time and had to file for this protection just to have enough time to sort it out. Taken in isolation, the drop in oil is the kind of thing that you could normally deal with in the course of business. You could finance it. Only due to the confluence of these events, it really led [Flying J] to this point."
All of Ogden, Utah-based Flying J's operations, including approximately 250 travel plazas and fuel stops, are open and serving customers in the normal course. The company plans to continue normal business operations as it moves through the reorganization process.
The filing includes Flying J Inc. and its Big West refining and Longhorn Pipeline subsidiaries only; however, "even in those cases, they are continuing to Operate," said Hill. "The company has sufficient cash flow to continue to finance their operations going forward."
No other subsidiaries or affiliates, including the company's Canadian operations, were included in the filing or are subject to the reorganization proceedings.
Hill said that no programs would be cut. "There were plans on the table for expanding the Bakersfield [Calif.] refinery. At this point, those plans are expected to go forward," he said.
"The good news is we have valuable assets, we do not expect layoffs will be necessary and we are optimistic we will be able to generate substantial cash internally to allow us to meet our obligations going forward," Adams added.
And Hill pointed out that in many bankruptcy cases, there is debt earned possession financing, where the filing company needs a new credit facility to continue operating. "At this point, Flying J is not seeking [debt earned possession financing]," he said. "[It has] sufficient cash flow resources to continue to finance operations."
The company will be filing customary "first day" motions to support its employees, customers and suppliers by providing for the company's associates to continue to be paid in the usual manner, and for their medical, dental, life insurance, disability and other benefits to continue without disruption. Suppliers will be paid under normal terms for goods and services provided after the filing date of Dec. 22, 2008.
"Our objective is to move through this process as quickly as possible and to work toward a solution that will address our short-term liquidity needs and allow us to meet our past obligations in full. In the meantime, our team is focused on continuing business as usual. We appreciate the support and understanding of our vendors and suppliers during this time," said Adams.
"Flying J has been around for 40 years, it's still in good shape; it just got into this tight situation because of these factors that are fairly extraordinary," concluded Hill.
Click herefor supplier and customer details about Flying J's restructuring.
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