PetroPlus, Largest European Refiner By Capacity, Files Bankruptcy

Tyler Durden's picture

Back on December 30, we noted that a little known name in the US, but very well known in Europe, PetroPlus is having significant solvency issues as banks froze a $1 billion revolver. Less than a month later the situation has proceeded to the next evolutionary step, as Europe's largest refiner by capacity has announced it will file for bankruptcy protection. And while operations should not be impacted, the fact that this comes just as Europe imposes an oil embargo on Iran, virtually guarantees that the continent's gasoline prices, already among the highest in the world are likely to set off even higher, paradoxically even as end-market demand is at lows. The bankruptcy will also guarantee that European initial jobless claims will plunge, especially if the BLS opens a Brussels office and applies its own very unique brand of "logic" to Europe.

From the WSJ:

Swiss-based refiner Petroplus Tuesday announced plans to file for insolvency after talks with its lenders to unblock credit lines failed.

Petroplus, which employs 2,500 and owns five refineries in Europe, said it was working to "safely shut down" operations as it prepares the necessary bankruptcy papers in Switzerland "as soon as possible." The company had already shuttered three of the five plants earlier this month, while keeping open refineries in Germany and the United Kingdom at reduced rates.


Petroplus shares were recently down 84% to 0.23 Swiss Francs. Trading was temporarily halted earlier Tuesday after shares dropped 88% soon after the open.


The company's demise comes as European refiners struggle with overcapacity, weak demand and an increasingly tight credit market. Petroplus engaged political leaders in many of its markets in its efforts to persuade financiers to keep credit lines open, but those efforts have come up short.


"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's Chief Executive Jean-Paul Vettier said in the statement. "We are fully aware of the impact that this will have on our workforce."

What is scary is that instead of finding a resolution, banks decided to accelerate and seek to control the underlying assets, in what continues to confirm that all of Europe is desperately battling a wholesale collateral crunch, and banks will do anything to procure any viable assets, even send the obligor in bankruptcy court.

The company has been negotiating with its banks—BNP Paribas, Société Générale, Natixis, Credit Suisse, Morgan Stanley, Deutsche Bank, Rabobank, ING, and Comerzbank. But the negotiations "have not been successful," Petroplus said in the Tuesday statement.


The lenders have served notice of acceleration, commenced enforcement actions and appointed a receiver, moves that "constitute an event of default" under the lending facility, Petroplus said.

One wonders what happens to Europe when end-demand returns yet refinery capacity is stuck at recession levels. Then again, one probably should wonder what will happen to inflation once US economic growth returns (yes, we know), and banks suddenly inject $1.5 trillion in excess reserves, or 150% the currency base, into the economy. 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fips_OnTheSpot's picture

Collateral, bitchez!

francis_sawyer's picture

I'm going long rickshaw pullers...

nod2glod's picture

The plant here in east london has just been closed, they areexpecting disruptions to petrol delivery here in london. The refinery is a major supplier to BP, who are in turn thinking about a barter system, crude for refined petrol if the refinery will stay open.

Vampyroteuthis infernalis's picture

one probably should wonder what will happen to inflation once US economic growth returns

If the US gov't won't let the economy reset like real capitalism, it is going to be a LONG time. Deflation bitchez!

Mongo's picture

What is scary is that instead of finding a resolution, banks decided to accelerate and seek to control the underlying assets, in what continues to confirm that all of Europe is desperately battling a wholesale collateral crunch, and banks will do anything to procure any viable assets, even send the obligor in bankruptcy court.

Yes, There you have it.

brewing's picture

bullish peak oil...

LawsofPhysics's picture

No, more oil being printed up as we speak.  let's hope the printers can keep up with the required flux needed to sustain this house of cards.

LongSoupLine's picture



This is obviously "baked in"...hence, bullish.


Quintus's picture

The UK newspapers are already carrying warnings of impending fuel shortages in the South East of England which was largely supplied by the Petroplus refinery at Coryton.

Glad I don't need to drive much.

MsCreant's picture

Over here in the US we have the 3,000 mile Ceasar salad (trucking makes it normal for food to come from very far away). Are your food sources closer to where you live? I don't drive much either, but I do think I will be impacted in other ways by gas shortages.

Quintus's picture

Good point.  I don't think it's quite as bad as that here in terms of food miles, but it is still a consideration.

If necessary (and I doubt it will be) I suspect fuel would be rationed to ensure that the food distribution network gets priority.  As long as supplies continue to make it to the shops, a complete lack of fuel for private vehicles would have almost no impact on my family.

Failing that, I have several months food supplies in hand already (You don't read ZH for nearly 3 years without learning to be prepared).  

If, by that time the situation hasn't been resolved, then I may be in trouble, as the small farm I am currently in the process of buying isn't mine yet, and I cannot therefore prepare it yet for a real SHTF situation.


disabledvet's picture

McDonalds BITCHEZ! (with coupons if necessary...

EscapeKey's picture

Not that I really subscribe to the "3000 mile Ceasar salad" outrage, as the miles quoted is really just the primary result of economic factors which are subject to change (oil becoming more expensive would change it in a flash), but when you head down Tesco or Sainsbury's, you find vegetables and fruit from around the world; Chile, Egypt, Kenya, South Africa, Israel... so a 3,000 mile Ceasar salad sounds likely here as well.

Teamtc321's picture

I have heard the our food in the U.S. travel's an average of 1400 miles to reach it source. Our transport trucking need's to be using Nat Gas if that is the case.  

Flakmeister's picture

Trying to perpetuate the myth that NG will save everyone??

You clearly know jackshit about

1) US Oil production

2) US NG production

3) What is the BTU relationship of the two?

Even with the renaissance in the NG production, the US is still a net importer....

Now before you get your panties in a knot: Yes, a few long distance truckers could arbitrage the cost per BTU by getting their rigs to run on NG, but if too many do it, the excess NG-oil spread will vanish and return to historical values....

chinaguy's picture

What many don't understand (& I've bored many here with this before) is how cheap the cost of this food insurance is.

I don't know about you folks, but my homeowner's insurance policy is about $3,000 annually...

For $ 500 you can put down 6 months of food for four people.

yes, for 1/6th the cost of your annual house insurance, you can have 6 months worth of food that will shelve for 20 years.

Go on Craig's List & buy a couple of clean - lidded steel drums ($30/per) - fill them with bags of grains & beans, spices, salt - put in a piece of dry ice (to kill weevils & eggs) & let sit for a couple of weeks.

buy Mylar bags & oxygen absorbers (Ebay $50) - borrow a Mylar bag sealer from your local LDS - seal the stuff & put it back in the drums -put it in your basement and forget it.

If the shit never hits the fan - donate the stuff to your local food bank. They will be happy to get it.

This is a NO BRAINER. It costs you little & TPTB don't give a shit about your welfare.

francis_sawyer's picture

Funny thing is... In Portugal... there is naturally a big seafood industry and the food doesn't have to travel... THAT... far...

Nevertheless... The fishing boats may be back to sails & oars pretty soon...

francis_sawyer's picture

Or maybe the US military could skip a few F-16 training sorties for a day or two and lend them a gallon of gas... Now wouldn't that be a novel idea?

gojam's picture

Hi Quintus.

Yeh, been watching that.

I think it may have be nationalised (or someone 'encouraged' to take it on [ How does Virgin Oil sound ?] )

Quintus's picture

I read that BP are proposing to supply the refinery with 'Free' crude in return for payment in refined product.  That would be one way of overcoming Petroplus' inability to finance raw material purchases.

Let's see what happens.


Dcheeth2's picture

Supplies were halted from the refinery yesterday. Only the South-east and London will be affected though, as the other refineries in the UK serve other regions and are not owned by Petroplus

EscapeKey's picture

Same here. Yay for working remote.

But house prices are still outrageous, council taxes get routed out of the counties to support the public sector employed north, and now we have to pay higher at the pumps too?

disabledvet's picture

Exactly. Shortages...NOT inflation. Would you take $10 a gallon gasoline if the alternative is you "don't have any?" probably a minor point given it's all related to the...ahem..."simple nature of what money is." Insofar as a couple trillion in excess reserves...I'd still be more worried about an outright default by say...the States of Illinois and Indiana...neither of which have had growing economies for decades nor have they had any interest in creating said reality. Nothing like a credit crunch to stare us all in the face of "to much cash." And...oh yeah...who needs a private bank of any scale to help with that anyways...

EscapeKey's picture

Yes, but shortages could very easily translate into increased prices, given lack of fixed prices.

And as it should, given the alternate is so much worse. Besides, this would give birth to arbitrage opportunities.

LawsofPhysics's picture

"but shortages could very easily translate into increased prices" - Sure, but only if people are willing to sell the item/commodity in question.  If people stop selling because the item or commodity is essential for day-to-day function/survival, the outcome is a bit different.

francis_sawyer's picture

next stop, the gold & PM 'refineries'...

Sandmann's picture

Governments should simply order it to continue refining using Civil Contingencies Act 2004 and Declare it a threat to national security - which it is if we contemplate war with Iran

smb12321's picture

Firms operating with public funds without regard to costs make it impossible to ascertain the value of anything since prices are set by decree and not markets.  The USSR's problem (and alternatively China's success) was that it never knew the price of its goods or services in the real world.  Thus, it kept operating at enormous deficits until the facade crumbled,.

Sandmann's picture

As a Statement of the Obvious that does not answer the question.  Markets seize up when fuel is rationed, whether by Bankruptcy or War and Government is there to keep Markets functioning.


MsCreant's picture

It looks like a finance issue, it is really a peak oil issue. We blew our oil wad, we over built in terms of the number, size, and sprawl of houses. We are not living sustainably, we need inputs that are to big to keep up with our oil Jonesing. Most travel a long way to work, shop, and have lots of activities located all over a city in a day. We think we need so much stuff to put in those houses, in order to be okay. We got into a financial hole pushing this lifestyle which is how the little guy and gal ran up all of the debt they have taken on. The debt is now freezing up oil markets.

Everything is everything. Let's hope that after winter, comes the spring.

GeneMarchbanks's picture

Europe has seen high prices over longer periods and adjusted somewhat alright with Eurorail and, generally speaking, efficient public transport plus short distances.

The US is now going to have start making those same adjustments. Convert them engines to vegetable oil and corner the bicycle market pronto. If you're in the Southwest, ... uhm... pray.

Teamtc321's picture

Diesel engines in our transportation fleet need to be converted to Nat Gas now. We need to stop playing politic's with our food transportation here in the U.S. before it is to late.

Flakmeister's picture

Are you Pickens personal shill and Toadie???

disabledvet's picture

Totally fixable...and unlike the US the UK already has a natural gas infrastructure built out. Hmmmm. But no one wants to build the engine. Geee...I wonder why that is...

GeneMarchbanks's picture

Do go on?

Which theory do you subscribe to? I believe I've heard them all but you never know.

Teamtc321's picture

The engines are already built, diesel engines cat, cummin's etc. can be adapted with ease to burn nat gas. 


LawsofPhysics's picture

Better check on the BTUs and the FLUX required to maintain things in the current state.  Many engines can be easily adapted to burn propane, methane, and hydrogen gas.  And burn it they will, faster than you can imagine.

Flakmeister's picture

Yes, he is delusional.... I do not doubt the first 2000 truckers that convert will recoup the up front CAPEX....after that, good luck....


CrazyCooter's picture

When I was still in TX, I had residential NatGas and looked very closely at converting my 300c to bi-fuel. In my case, the numbers did not work, but I had the option to pull the trigger and do it.

It is very important to note that bi-fuel is the way to go forward, with some caveats. A home compressor system is required, which implies a residential nat gas supply. Assuming bi-fuel and home compression, a vehicle could conveniently burn the cheapest resource. At the time I priced it out, nat gas (by Gallon Gas Equivalent - GGE) was almost 40% cheaper as best I could tell (residential rates). I noted that all the public CNG stations absorbed this savings, thus the residential compressor.

All that said, CNG has long been popular with fleet vehicles ... and I am sure fleet vehicles have accountants with 10-keys thinking for them, so the numbers can work. But a fleet can afford its own nat gas supply, compressor, mechanics, etc. In the case of a consumer, the crux is an affordable bi-fuel vehicle and the service infrastructure (e.g. mechanic) to keep it operating. This was simple in the days of the carburetor, but today with all the electronics, not so much.

I still maintain a manufacturer can do a bi-fuel option for its most popular vehicle at a very affordable (and profitable) rate to the consumer. I figured it would cost a few grand as an add on, but the manufacturers are loathe to do this...



Little Red Rooter's picture

The need for potatoes was grand

As the riots got way out of hand

This was after the crash

Where they lost all their cash

And wished they bought oxen and land

Savvy's picture

There was an old man from Leeds

Who's garden produced only weeds

Reading "inflation"!

he drove to the station

Cause it only leads if it bleeds

Karl Napp's picture

Yesterday one of Germany's largest drugstore chain (Schlecker) filed for bankcruptcy, today it became known that the scond largest DIY chain (Praktiker) has difficulties to refinance its working capital needs. Yeah private consumption is great here in Germany.

Sandmann's picture

Schlecker was a skinflint who nickel and dimed his business to bankruptcy. DM and the other competitors are doing okay



You should have commented on MAN-Roland which Allianz SE let collapse

Trying to Understand's picture

...didn't obummer loan them a big chunk of change... if so... is this another solyndra??? If someone has a link...

Iam_Silverman's picture

"If someone has a link..."

I'm sure Mitt Romney's gang will have one up shortly................Oh, and I bet they'll implicate Newt as being in on it too!

Happy Swede's picture

"Then again, one probably should wonder what will happen to inflation once US economic growth returns (yes, we know), and banks suddenly inject $1.5 trillion in excess reserves, or 150% the currency base, into the economy. "


BANKS DO NOT LEND RESERVES. Period. They are capital constrained not revenue constrained and give loans to credit worthy customers. Debunks the whole hyperinflation argument. Sorry guys.


If a bank gives a loan to a customer it simply credits the customers bank account. It DOES NOT MOVE THE MONEY FROM OTHER DEPOSITS. Yes it is created out of thin air. Reserves hence have little or no impact on bank lending hence hyperinflation is not coming.

Quintus's picture

Are you saying that a bank with $100 billion in reserves won't lend out (Create) more money than that bank with $1 billion in reserves?

Oh, I think they will.  When has a bank ever just sat on capital that it could make a penny on by lending out?