Chemical maker TPC defends bankruptcy financing amid bondholder battle

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

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(Reuters) – Texas-based petrochemical producer TPC Group defended its bankruptcy financing plan in Delaware bankruptcy court on Thursday as groups of bondholders clashed over plans to restructure the company.

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

At the company’s first hearing before U.S. Bankruptcy Judge Craig Goldblatt in Wilmington, TPC asked for permission to fund its bankruptcy with $85 million in new funds 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 ensured that its potentially controversial aspects could be canceled later if necessary.

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

Bayside and Cerberus own 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 in TPC. on a fixed restructuring trajectory.

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

“If there is something better that comes along, we will absolutely pursue 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 $5 million to $10 million under the restructuring proposed by TCP. Most of the lawsuits are consolidated in multi-district litigation in Orange County, Texas, and TPC has already paid $134.5 million to settle thousands of other property damage and evacuation claims.

Upon its bankruptcy, the company said it would 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 Reenger of Milbank

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

Read more: Chemical maker TPC Group files pre-arranged balance sheet

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Anne G. Cash