UPDATE 1-Coffeyville refinery shut to Sept, debt rating cut
Mon Jul 16, 2007 1:55PM EDT
(Recasts, adds byline, details, company comment, debt downgrade)
By Robert Campbell
NEW YORK, July 16 (Reuters) - Independent U.S. refiner Coffeyville Resources' debt ratings were cut on Monday as an industry source said the company's flooded Kansas refinery was unlikely to restart until early September.
Moody's Investors Service pushed Coffeyville's corporate family rating deeper into speculative territory, cutting it from B2 to B3 amid uncertainty over the losses Coffeyville faces from the shutdown of the refinery and an associated oil spill.
Among the debt facilities downgraded are a $775 million senior first-lien secured term loan and a $150 million senior first-lien secured revolving credit facility.
Coffeyville shut its 108,000 barrels per day refinery on July 1 when the nearby Verdigris River flooded the facility.
An industry source said on Monday the company did not expect the refinery to restart before early September due to volume of repair work needed at the facility.
"If you were thinking Labor Day, that would be an appropriate time frame," said an industry source familiar with refinery operations.
The U.S. Labor Day holiday falls on Sept. 3 this year.
Coffeyville spokesman Steve Eames said the company was not yet ready to release an estimate of how long it would take to restart the refinery and declined to comment on the Moody's downgrade.
Moody's said in its release announcing the ratings downgrade that Coffeyville officials had said major process units at the refinery were not "directly impacted" by the flooding but damage to hundreds of pumps and motors was extensive.
Coffeyville may have to call on its owners for additional equity capital to help cover short-term expenses while business interruption insurance claims are processed and will almost certainly delay the company's plans for an initial public offering (IPO).
Coffeyville Resources' main backers are Goldman Sachs Capital Partners and Kelso Investment Associates. Goldman's commodities arm J. Aron also provides hedging and oil trading services to Coffeyville.
In addition to the refinery, Coffeyville also operates a crude oil gathering business in Kansas and Oklahoma as well as a fertilizer plant next to the refinery. The company said last Friday the fertilizer plant had suffered less damage than the refinery and was in the process of restarting.
Coffeyville was continuing to buy crude oil from its customers to feed its gathering system. Purchased oil is being stored at Cushing, Oklahoma, and elsewhere as well as being sold to other refiners, said Coffeyville's Eames. The company has no plans to curtail gathering operations during the refinery outage, he added.
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