Chemical Maker TPC Defends Bankruptcy Financing Amid Bondholder Battle


A process tower flies through the air after exploding at the TPC Group petrochemical plant, after an earlier massive explosion caused a fire at the plant in Port Neches, Texas. REUTERS/Erwin Seba TPX IMAGES OF THE DAY

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(Reuters) – Texas petrochemical producer TPC Group defended its bankruptcy financing proposal in Delaware bankruptcy court on Thursday as groups of bondholders clashed over the company’s restructuring proposal.

TPC filed for Chapter 11 protection Wednesday after struggling with costs and legal claims related to a 2019 explosion and fire at its Port Neches, Texas, manufacturing plant. It also cited the COVID-19 pandemic, a severe winter storm in Texas and a series of equipment failures as reasons for its bankruptcy. The company plans to use its bankruptcy case to eliminate $950 million in secured debt and eliminate liabilities related to the 2019 explosion.

During the company’s first hearing before US Bankruptcy Judge Craig Goldblatt in Wilmington, TPC requested permission to finance its bankruptcy with $85 million in new money provided by a coalition of the company’s existing lenders.

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Goldblatt did not rule immediately. He said he would approve the loan on a temporary basis, once he made sure that the potentially controversial aspects of it could be reversed later if necessary.

Bond investors Bayside Capital Inc and Cerberus Capital Management LP opposed the loan, arguing that it rewarded the broader coalition of lenders with an unnecessary $5 million fee while also putting them first in line for repayment. .

Bayside and Cerberus hold about $90 million of the company’s $1.3 billion in debt, and they said in court they offered cheaper financing and a more flexible proposal that didn’t lock TPC into a fixed path of restructuring.

TPC’s financial adviser, Zul Jamal, disagreed, telling the court that the existing financing agreement allowed the company to gain broad support for a restructuring plan without tying the company’s hands.

“If something better comes along, we’ll absolutely go with it,” Jamal said.

Unsecured creditors, including more than 7,000 plaintiffs who sued TPC for property damage and forced evacuation costs after the 2019 fire and explosion, would receive between $5 million and $10 million under TCP’s proposed restructuring. Most of the lawsuits are consolidated in multi-district statewide litigation in Orange County, Texas, and TPC has already paid $134.5 million to settle thousands of other property damage and evacuation claims.

During its bankruptcy, the company said it will continue to process and sell petrochemicals used in the manufacture of plastics, tires and gasoline.

The case is TPC Group, US Bankruptcy Court, District of Delaware, No. 22-10493.

For Debtors: Jim Prince and Kevin Jacobs of Baker Botts, Curtis Miller of Morris Nichols Arsht & Tunnell For Bayside and Cerberus: Aaron Renenger of Milbank

For litigation plaintiffs: Sander Esserman of Stutzman, Bromberg, Esserman & Plifka

Read more: Chemical manufacturer TPC Group files for pre-arranged bankruptcy

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