July 1 (Reuters) – A $ 440 million loan linked to the now inactive Limetree Bay refinery in St. Croix has lost nearly 30% of its value amid a severe cash shortage that could leave some number of US mutual funds holding debt with losses.
The loan is backed by income from oil storage operations at the 1,500-acre (600-hectare) complex in the Virgin Islands. But those operations lost their biggest customer last month when the refinery announced it would shut down indefinitely due to financial woes and pollution issues that prompted enforcement action from the U.S. Environmental Protection Agency. ‘environment.
Bid prices on the Limetree Bay Terminals LLC-backed loan fell below 70 cents on the dollar this week, from a three-month high of 97 cents, according to data from Refinitiv. The loan matures in 2024 and several mutual funds are holding tranches of it, according to filings with the U.S. Securities and Exchange Commission.
As a result of the shutdown, storage and terminal operations will lose $ 52 million in expected operating revenue in fiscal 2021, according to analysts at Moody’s Investors Service. The rating agency downgraded the loan to “Caa1” with a negative outlook.
The terminal, with a capacity of 34 million barrels, is a subsidiary of Limetree Bay Energy LLC, which is owned by a subsidiary of private sponsors EIG and a syndicate of other investors.
The terminal stopped making payments to the refinery in mid-May after the EPA ordered all operations at the adjacent refinery to suspend for up to 60 days.
“Without the refinery as a customer, the expected recovery in credit metrics and the generation of significant excess cash flow in 2021 becomes unlikely,” Moody’s said in a June 28 research note.
(This story corrects the capacity figure in the 5th paragraph to 34 million instead of 32 million)
Reporting by Tim McLaughlin in Boston; edited by Jonathan Oatis
Our standards: Thomson Reuters Trust Principles.