Stock analyst Ben Brownlow of Morgan Keegan, Memphis, Tenn., said those changes were the tipping point for a company that historically had a troubled capital structure.
"For Flying J, it was purely because of their capital structure and on top of that the decline of oil prices," Brownlow told CSP Daily News this week. "The refinery margin environment has been extremely difficult, and they have that Big West refining operation, and that put pressure on the company as a whole. So it was more due to a decline in oil prices and the refinery margin being put on a capital structure that was already teetering."
The reorganization filing clears the way for the breakup of the company, including the sale of its approximately 250 travel centers and the sale of its Big West of California refinery and other assets for approximately $53 million, as well as other asset sales.
Earlier this month, Alon USA Energy Inc., Houston, was selected by the bankruptcy court to be the "stalking horse" bidder for Flying J's shuttered Bakersfield, Calif., refinery. Alon bid $40 million in cash plus an amount equal to inventory on hand for the 70,000-barrel-per-day (bpd) refinery shut in January 2009.
The company also sold its Longhorn Partners Pipeline LP unit to Magellan Midstream Partners LP for $340 million last June and its oil and gas assets to El Paso Corp. for $103.5 million in December.
Last July, Flying J agreed to sell its travel-center business to Pilot Travel Centers LLC, Knoxville, Tenn., for about $1.17 billion. Pilot will pay $515 million in cash and the remainder in the form of new equity securities. Flying J will have a 10% to 12% stake in Pilot after the transaction, according to the Reuters report.
The reorganization plan is still subject to a vote by stakeholders and creditors. All business-unit sales also are subject to review by the Federal Trade Commission (FTC).
The case is Flying J Inc, U.S. Bankruptcy Court, District of Delaware, No. 08-13384.
(Click here for previous CSP Daily News coverage of Flying J.)
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