Limetree Bay Ventures, announced Nov. 30 that it had closed on $1.25 billion financing to restart its St. Croix refinery, which the company said could happen by “the end of next year.”
There was no report on the $70 million Limetree Bay committed to release to the V.I. government upon closing of all the necessary agreements to restart the refinery, but company officials are speaking of the restart as a done deal.
“The closing of the financing provides the resources necessary to complete the refinery restart,” said Brian Lever, president of Limetree Bay Refining, in a statement issued by the company. “We have 1,300 workers currently involved in the project and expect a significant ramp in activity over the coming months as we prepare for restart by the end of next year. We are very grateful to the broad team that has made this possible.”
According to the company, the financing includes $550 million of preferred equity and a $700 million term loan. The preferred equity reportedly was led by funds and accounts managed by EIG Global Energy Partners, which was joined by other investors including funds affiliated with BlackRock and Barclays, The term loan was led by Westbourne Capital. ArcLight reportedly also made a significant additional common equity commitment to Limetree Bay.
Barclays acted as lead placement agent and EIG Global Energy Partners Capital Markets, LLC served as co-placement agent on the preferred equity issuance by Limetree Bay. Goldman Sachs Bank USA and Barclays acted as joint lead arrangers and joint bookrunners on the term loan issuance by Limetree Bay Refining.
The government’s agreement with Limetree Bay calls for an immediate payment of $70 million; $40 million as a short-term loan and $30 million as payment for a land purchase.
“Upon the closing of the transaction, ArcLight Capital will make a $70 million closing payment to the Government of the Virgin Islands,” Government House announced in July, when unveiling a proposed new agreement with Limetree Bay and plans to potentially partially restart the refinery.
At a July 18 hearing on the deal, Finance Commissioner Valdamier Collens said the deal involved “an up front payment of $70 million.”
In August, Collens told the V.I. Legislature the “money was always contingent on ArcLight securing the deal with an operator which they have not done yet. When that happens then it will be immediate.”
Although it was not discussed at the July hearing before the Legislature approved the agreement, a close reading finds two brief mentions of a “refinery transfer agreement” which has to be signed before the deal is considered “closed.”
In the agreement’s introduction, there is a clause saying “… in order to facilitate a Refinery Restart, Terminal Operator will enter into on or around the date hereof a transfer and assignment agreement (the “Refinery Transfer Agreement”) with Refinery Operator, which is an indirect subsidiary of Limetree Bay Ventures … .” And buried in the terms for when the deal “closes” it says “the transactions contemplated by the Refinery Transfer Agreement shall have been consummated.”
“They are waiting to finish up the negotiations with the actual franchisee that is going to be running the operations,” Budget Director Julio Rhymer said at the same hearing.
Limetree Bay issued a release on business press release website PRNewsire but, in a change from past practice, did not send the Source a press release. Its past releases tell recipients to contact Limetree Bay at questions@lbterminals.com for more information. In November and again on Monday, the Source sent the following questions to that email address:
– Has Limetree Bay released the $70 million, reflecting that a contract is in place to restart and run the refinery?
– If not, why not?
– If so, why has this not been publicized?
– Will anyone representing Limetree Bay go on record by name saying there is a 100 percent certainty you will restart the refinery?
Limetree Bay had not responded to the Source’s requests for information.
Governor Mapp in one of his last interviews leading up to the run off election said he elected not to pursue the 40 million dollar loan. Limetree needed to front more of the start up capital and asked them to forego the loan. Which means the first quarterly payments will go directly to government from the start.
On Friday, however, during an interview with The Consortium’s Ernice Gilbert, Mr. Mapp said the government would no longer take the $40 million loan. Instead, it will receive $30 million, which is for the sale of property that came as part of the deal.
“I am not taking the loan,” Mr. Mapp said. “Because the investment requirement in terms of the additional dollars needed for the rebuild of the refinery, ArcLight had asked me not to execute, or to pull the trigger on the loan side, because in addition to borrowing more money, they had to put more equity capital on the table. And so I did not have a problem giving up a $40 million loan to get a $400 million additional investment in the St. Croix economy.”
The news will be welcomed by many who saw the $40 million loan as a bad deal. The government would find itself repaying Limetree Bay from funds it would have collected from the firm, and many contended that there was no immediate need for the debt.
During the interview, the governor said officials of ArcLight had informed him that investment in the refinery had risen to $1.679 billion, hence the additional $400 million investment on St. Croix (Limetree Bay had originally projected an investment of $1.5 billion). He said the additional investment would add roughly $25 million to the Treasury, and that’s before accounting for payroll taxes.
Mr. Mapp said all final closings were in the process, and that as funds are released to ArcLight Partners by BP, the company would pay the G.V.I. the $30 million. “We expect to see those funds in the Treasury probably within the next 10 to 15 days,” he said.