Drudge Retort: The Other Side of the News
Wednesday, February 21, 2018

Throughout 2016 and 2017, a rail terminal built to accept crude oil for the largest East Coast refinery often sat idle, with few trains showing up to unload. Although little oil flowed, plenty of money did. Under a deal Philadelphia Energy Solutions (PES) signed in 2015, the refiner paid minimum quarterly payments of $30 million to terminal owner North Yard Logistics LP - even if little crude arrived. Much of that cash, in turn, flowed to the investors that own both PES and North Yard, led by the Carlyle Group, a global private equity firm with $178 billion in assets. The deal in effect guaranteed lucrative payouts to Carlyle regardless of whether the refinery benefited from the arrangement. When oil market conditions made the rail shipments unprofitable later that year, the refinery took heavy losses while its investors continued to collect large distributions for two more years.

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The rail contract exemplifies the financial demands Carlyle imposed on PES in the years leading up to the refiner's bankruptcy in January. The Carlyle-led consortium collected at least $594 million in cash distributions from PES before it collapsed, according to a Reuters review of bankruptcy filings. Carlyle paid $175 million in 2012 for its two-thirds stake in the refiner.

More than half the distributions to the Carlyle-led investors were financed by loans against PES assets that the refiner now can't pay back, the filings show. The rest came from the refiner's operating budget and payments PES made under the terminal deal to North Yard, a firm with no offices or employees that PES spun off in 2015. ...

"The Carlyle Group looks more like a corporate raider than a savior in this deal," [Advanced Biofuels Council head Brooke] Coleman said.

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Deals like this are how Trump and Romney made their money.

#1 | Posted by BruceBanner at 2018-02-20 12:10 PM | Reply

Actually, many analysts, other refiners and the State of PA have concluded that it wasn't the $30M in "rent", for lack of a better term, but the RIN price increase of almost 2000% that caused PES to file for bankruptcy. From your article:

Carlyle Group spokesman Christopher Ullman declined to comment on whether the distributions or the rail-terminal deal contributed to the refiner's bankruptcy. PES spokeswoman Cherice Corley defended the payments to Carlyle and said the biofuels regulations played a "significant" role its collapse.

"We feel our capital structure was appropriate, and any suggestion that it was the cause of our restructuring is completely ignoring the significant effect of the flawed Renewable Fuel Standard (RFS)," Corley said.

Other refiners and Pennsylvania officials have also blamed biofuels regulation for the South Philadelphia refinery's failure, triggering renewed debate about the program on Capitol Hill.

Refiners without the necessary blending facilities, such as PES, are required to purchase regulatory credits, known as RINs, from firms that do such blending. The cost of compliance for PES rose from $13 million in 2012 to $218 million in 2017 as prices increased for the credits, which are traded in an open market.

The refiner, however, failed to pay a large portion of that obligation. In addition to its conventional debt, PES still owes the U.S. Environmental Protection Agency (EPA) regulatory credits worth about $350 million, an amount tied to the fuel it produced over the past two years, according to filings. The firm stopped buying RINs last year - and instead sold them to other refiners for what likely amounted to tens of millions of dollars, Reuters reported in November.

Sorry this hurts your narrative, but a regulation based expense increase of $205M/year in a declining market far overshadows the "rent" that Carlyle Group was getting from PES in terms of operational expenses.

#2 | Posted by Rightocenter at 2018-02-20 12:22 PM | Reply

"narrative"

How many jobs did this create? or eliminate?

looks like a real ------ deal, for mr dealmaker

#3 | Posted by ChiefTutMoses at 2018-02-20 12:44 PM | Reply

Isn't Carlyle group the Bush's company?

#4 | Posted by kudzu at 2018-02-20 01:43 PM | Reply

#3

It's been on the rocks since St. Obama's admin Cocochief, why don't you tell us how it all werked, especially why RFS caused it to go out of biznezz.

#5 | Posted by Rightocenter at 2018-02-20 01:51 PM | Reply

"Sorry this hurts your narrative, but a regulation based expense increase of $205M/year in a declining market far overshadows the "rent" that Carlyle Group was getting from PES in terms of operational expenses."

I'm not against the argument that regulations did this, but the article clearly disproves it. Other companies, subject to the same regulations, are profiting nicely.

#6 | Posted by BruceBanner at 2018-02-20 01:54 PM | Reply

I'm not against the argument that regulations did this, but the article clearly disproves it. Other companies, subject to the same regulations, are profiting nicely.

That's because, for mostly competitive reasons, they are getting crude to refine. Pretty easy to profit when your operating at capacity.

My point is that the $30M payment you are highlighting is greatly overshadowed by the $205M increase in RIN capital cost in just 5 years.

#7 | Posted by Rightocenter at 2018-02-20 02:02 PM | Reply

does it seem reasonable that those numbers are accurate? How can a regulation affect just one company like this?

it is more likely that management is sucking the company dry instead of making the right decisions, like they must have been at the other, profitable, companies.

#8 | Posted by BruceBanner at 2018-02-20 02:20 PM | Reply

"does it seem reasonable that those numbers are accurate?"

to the DR sloppiest and --------- litigator, ever? it is all he needs.

"How can a regulation affect just one company like this"
magic. and convenience
see, this is where OBAMAS eight years of presiding over rising oil production suddenly becomes something else.

#9 | Posted by ChiefTutMoses at 2018-02-20 02:32 PM | Reply

does it seem reasonable that those numbers are accurate?

Yes.

How can a regulation affect just one company like this?

It affects everyone, but in this instance, based on a number of factors, including mismanagement both before and after Carlyle and Sunoco bought it, a serious drop in heavy crude prices, antiquated technology that kept it from mixing in biofuels so it wouldn't have to buy RIN credits and debt service (largely attributable to Carlyle taking distributions from loans that it obtained in 2013-2015, for which it should be seriously criticized), PES filed a Reorg Plan in January, 2018.

Because it couldn't meet the RFS mandate, it had to buy RIN credits, which lead to the filing for Chapter 11.

Don't get me wrong, Carlyle is not blameless in this, but at the end of the day, RIN credits were the main debt behind the filing.

Biggest U.S. East Coast Oil Refinery Files for Bankruptcy

Philadelphia Energy Solutions files for bankruptcy, blames RFS

#10 | Posted by Rightocenter at 2018-02-20 02:51 PM | Reply

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this is where OBAMAS eight years of presiding over rising oil production suddenly becomes something else.

Actually, that had absolutely nothing to do with it, since PES is a heavy crude processing facility that relies on imports from abroad (from the Philadelphia Business Journal article linked above):

"PES, like most East Coast refineries, imports crude oil from West Africa and the North Sea. "These heavier crudes are more costly to ship and refine into gasoline, diesel, jet fuel and other refined products," the Renewable Fuels Association said."

Your love of loudly proclaiming your ignorance on a daily basis for all to see is what makes you "special", CocoChief.

#11 | Posted by Rightocenter at 2018-02-20 02:57 PM | Reply

"Philadelphia Business Journal"

HARDYHAR!

#12 | Posted by ChiefTutMoses at 2018-02-20 03:05 PM | Reply

#13

God you are dumb, American City Business Journals has publications in 40 different major metropolitan areas, it also owns Street and Smith and The Sporting News.

#13 | Posted by Rightocenter at 2018-02-20 04:02 PM | Reply

LOL, self retorting numbering, that should be #12.

#14 | Posted by Rightocenter at 2018-02-20 04:03 PM | Reply

"How can a regulation affect just one company like this?"

I'm not familiar with this specific case and I'm speaking in generalities. But when a new standard is put enforce by a regulatory authority you can have some facilities that are are are already meeting that standard, some that are nearing it, and some that are miles from meeting the standard.

My experience is the grain and feed industry and we experience this all the time

#15 | Posted by eberly at 2018-02-20 04:20 PM | Reply | Newsworthy 1

American City Business Journals is a corrupt company masquerading as a news organization.
They reward mediocre performers willing to generate "fake news" instead of those who want to produce genuine journalism

#16 | Posted by ChiefTutMoses at 2018-02-20 04:21 PM | Reply

American City Business Journals

Pathological liars

Just like you

#17 | Posted by ChiefTutMoses at 2018-02-20 04:25 PM | Reply

American City Business Journals is a corrupt company masquerading as a news organization. They reward mediocre performers willing to generate "fake news" instead of those who want to produce genuine journalism

Boy, did you pick the wrong hill to die on.

My wife was a reporter for one of the Business Journal papers for several years. They did some excellent reporting within a stretched budget and gave business readers an alternative to the major city paper.

No one I knew was producing "fake news," nor was there any evidence of corruption.

#19 | Posted by rcade at 2018-02-21 09:10 AM | Reply | Newsworthy 2

The Carlyle Group
From Wikipedia, the free encyclopedia

The Carlyle Group is an American multinational private equity, alternative asset management and financial services corporation. As one of the largest private equity and alternative investment firms in the world, Carlyle specializes in four key business areas: corporate private equity, real assets, global credit, and investment solutions.

Carlyle's corporate private equity business has been one of the largest investors in leveraged buyout transactions over the decade 2004–2014 (or perhaps 2000–2010),[citation needed] while its real estate business has actively acquired commercial real estate. Since its inception, Carlyle has at various times had investments in companies such as Booz Allen Hamilton, Dex Media, Dunkin' Brands, Freescale Semiconductor, Getty Images, HCR Manor Care, Hertz, Kinder Morgan, Nielsen, and United Defense.

#20 | Posted by Sniper at 2018-02-21 01:26 PM | Reply

Boy, did you pick the wrong hill to die on.

CocoChiefSamTutIAmMosesVille does that on a daily basis, it's his "thing."

That being said, the LA Business Journal is must reading for anyone who works and invests in LA and is a excellent paper with outstanding journalists. They will do an occasional puff piece to make some $$, but for the most part it is far better and more thorough than the LA Times business section.

#21 | Posted by Rightocenter at 2018-02-21 03:25 PM | Reply

I don't know why they stopped refining there, but thank god they did. The ride home from the airport used to smell like an exploding fart factory.

#22 | Posted by TFDNihilist at 2018-02-21 06:36 PM | Reply

They stopped refining there because the equipment was in very poor condition. The company I used to work for was a petro/chemical equipment manufacturer, our techs told us some stories about that refinery, deferred maintenance/lack of upgrading going back years left it an outdated wreck. It sounds like Carlyle made a hell of a lot of money off a turd.

#23 | Posted by Odbrochound at 2018-02-22 08:04 AM | Reply

"Job Creators" hard at work

The biggest problem with today's capitalists is they don't see any difference between wealth creation and wealth extraction. All the money they extracted came from the work other people did without getting paid for. I have no problem with someone getting fantastically from their own ideas and work but there are too many who get rich by playing technically legal games with other peoples lives and companies.

#24 | Posted by hatter5183 at 2018-02-22 12:47 PM | Reply

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