ZURICH/LONDON (Reuters) - Swiss-based oil refiner Petroplus is filing for insolvency, putting over 2,000 jobs across Europe at risk, after it defaulted on $1.75 billion (1.12 billion pound) of debt.
Europe’s largest independent refiner by capacity has been teetering since its lenders restricted credit late last year, a victim of thin refining margins and high debt that was a result of its private equity-backed business model.
The company had already stopped output at three refineries in Switzerland, France and Belgium. On Tuesday an email to customers of its Coryton refinery in southern England, seen by Reuters, said it was halting supplies there.
However, the Department of Energy and Climate Change said the plant, which supplies around 20 percent of the market in southeast England, was still operational.
Petroplus’s Ingolstadt refinery in Germany continues to supply the market with fuel, a trade source said on Tuesday. It recently cut output to half the normal level, as did Coryton.
“We have worked hard to avoid this outcome, but were ultimately not able to come to an agreement with our lenders to resolve these issues given the very tight and difficult European credit and refining markets,” Petroplus Chief Executive Jean-Paul Vettier said in a statement on Tuesday.
Petroplus’ board is preparing to file for insolvency in Switzerland. PricewaterhouseCoopers was appointed administrator of the company’s UK unit on Tuesday.
Shares in Petroplus plunged more than 80 percent to 0.25 Swiss franc at 1444 GMT. A year earlier they were trading close to 15 francs.
Administrators of the Petroplus units will struggle to find buyers for the refineries.
A dismal outlook for the European crude processing industry, amid falling fuel demand, has prompted several companies to put assets on the market. But even rock-bottom prices have failed to attract bidders, even for good quality facilities.
Asian companies, which may be interested in establishing a European oil trading operation, are seen as possible buyers, or Russian companies that want to secure an outlet for their crude oil.
However, the big oil companies have been whittling down their presence in European refining for years and are not seen as likely buyers.
According to the UK Petroleum Industry Association, Coryton accounts for 10 percent of the UK fuels market.
Wholesaler Greenergy, which says it supplies one fifth of all the road fuel sold in Britain, said it was making up any shortfall.
A spokeswoman for oil major BP, a customer of Coryton said: “There are no immediate supply issues across our retail network.”
Petroplus’s announcement had little impact on gasoline prices as traders have been monitoring the company’s problems closely.
In a market plagued by overcapacity the demise of Petroplus, whose five European refineries have combined throughput of some 667,0000 barrels per day, could ease supply conditions and help boost margins.
Competitors, such as India’s Essar which operates a refinery in the north of England, will be keen to jump into any gaps.
The UK and Swiss governments declined to say if they were prepared to offer financial support to allow the Petroplus to continue operating.
Petroplus has $600 million of senior notes due in 2014, $600 million senior notes due in 2017, and $400 million senior notes due in 2019. It also has a $150 million convertible bond due in 2015 and a $500 million convertible bond due in 2013.
Additional reporting by Tom Bergin, Sarah Young in London and Emma Farge and Katie Reid in Zurich; Editing by Mike Nesbit and Erica Billingham