Alon USA Closes Krotz Springs Acquisition

Purchases Valero's refinery for $333 million plus $140 million in capital

DALLAS -- Alon USA Energy Inc. said that it has completed the acquisition of the Krotz Springs refinery from Valero Energy Corp. The purchase price of this transaction was $333 million in cash plus approximately $140 million for working capital, including inventories.

"This latest acquisition is another step in our business plan to methodically grow our operations and expand our refining capacity. We anticipate that this transaction should generate strong free cash flow which should enable us to repay its associated debt in as early as three years," said David Wiessman, executive chairman [image-nocss] of Alon. "We would like to thank Valero for partnering with us in this transaction, allowing both of our companies to further their strategic initiatives."

"With the completion of the Krotz Springs refinery acquisition, our crude refining capacity is expected to rise by 50% to approximately 250,000 barrels per day, including four refineries located on the West Coast, West Texas and Gulf Coast," said Jeff Morris, Alon's president and CEO. He added that Alon Israel's support and investment in this transaction "was critical in allowing us to create the optimal financing structure for the acquisition."

The Krotz Springs refinery, with a crude capacity of approximately 83,100 bpd, services multiple demand centers in the Southeast and East Coast markets through the low-cost Colonial pipeline. The 2007 refined product mix from the Krotz Springs refinery, with a current 6.5 complexity rating, consists of approximately 96% light products, with the following yields: 44% gasoline, 44% distillates and light cycle oils, 8% petrochemicals and 4% of heavy products.

Financing for the transaction included a $302 million term loan, including a $50 million sub-facility to support substantial hedging, arranged by Credit Suisse, who also was Alon's M&A advisor for the transaction. In addition, Bank of America arranged a $400 million revolver facility with an accordion feature of an additional $100 million to support ongoing working capital needs.

Funds for a portion of the purchase price were provided through an $80 million equity investment by Alon Israel in preferred stock of a new Alon holding company subsidiary, which may be exchanged for shares of Alon common stock after three years. Also, Alon Israel provided for the issuance of $55 million of letters of credit at favorable rates to Alon to support increased borrowing capacity under the Bank of America revolving credit facility. A committee of independent and disinterested members of Alon's board of directors negotiated and approved these transactions.

Alon USA Energy, Dallas, is an independent refiner and marketer of petroleum products, operating primarily in the south central, southwestern and western regions of the United States. The company owns four crude oil refineries in Texas, California, Louisiana and Oregon, with an aggregate crude oil throughput capacity of approximately 250,000 bpd. Alon markets gasoline and diesel products under the FINA brand name. It also operates more than 300 convenience stores in West Texas and New Mexico primarily under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery. In addition, Alon supplies approximately 800 additional FINA-branded locations.

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