Hess Bid. I Don't Understand. Explanation Pls

A bunch of fluff and BS. Mapp promises that in a week the GERS financial issues will be resolved without their board's plan being implemented but the legal contest to the bidding process isn't to be held until December 17th.

Glad someone asked. It doesn't make sense to me either.

Logic tells me that the Governor and his staff have analyzed all 3 bids, to determine which company offered the most potential to the VI economy, and the GVI coffers.
They took it a step further and negotiated a tentative operating agreement for the terminal storage and hopefully refining operations.

"Putting the cart before the horse."

Logic tells me that the Governor and his staff have analyzed all 3 bids, to determine which company offered the most potential to the VI economy, and the GVI coffers.
They took it a step further and negotiated a tentative operating agreement for the terminal storage and hopefully refining operations.

Bingo!

I don't understand how the VI government can determine which bid to accept. Isn't that why there's an auction and a judge? The VI government is just one of many creditors from what I understand.

(tu)

Logic tells me that the Governor and his staff have analyzed all 3 bids, to determine which company offered the most potential to the VI economy, and the GVI coffers.
They took it a step further and negotiated a tentative operating agreement for the terminal storage and hopefully refining operations.

Bingo!

Theoretically they can't. However they can look at the bids and talk to the bidders to see who offers the best return for the vi govt. Who ever buys is going to have to secure an operating agreement and it would behoove Hovensa to decide that the company most likely to secure that agreement is the top bidder. After all HOVIC/PDVSA wants to rid themselves of Hovensa so declaring someone who is unlikely to get that agreement THE WINNER WILL NOT GET THEM WHERE THEY WANT TO BE. both bids are contingent on the buyer being able to get that agreement thru the legislature. Additional by virtue of their(GOVT) lien they own about a 1/3 of the refinery hence Monarchs bid that only, in real dollars, purchased that lien and only offered pie in the sky promises based on future earnings. Before tax? After tax? Makes a big difference.

Thanks, Jane, that helps a lot, but did the VI govt even look at other agreements? Isn't that what Monarch and the other complaining about and why the judge smells collusion? Is the operating agreement required for govt concessions? It seems to me like Mapp is acting like he owns Hovensa.

Operating agreement = concessions
Monarch did not make the threshold set to be a real bidder
The only ones who did are Arc Light and Buckeye. I don't know what was presented to the govt in the way of concessions requested/ granted, etc. what I do know is that although on the surface buckeye looks like the better bid they have never carved that dollar amt up so we don't really know who will get what. Arc Light has line items to identify where every dollar will go. Who gets what. So it may very well be that the Govt will get a higher payout with the smaller bid.

Monarch is just pissed off that they couldn't do an end run around the whole process and get the govt to turn over the lien to them.

The unsecured creditors want to make sure that there will be enough money left over for them and are just covering their asses.

The VI Govt by virtue of that lien and as representative of the govt Mapp does sort of own HOV. I've see documents that consider that lien to be as worth much as a 3rd share of the property. While we have no official standing to approve or disapprove who the top bidder is, it will not be someone who the govt has decided is not paying enough into our coffers or is asking for concessions far beyond what the governor believes the legislature will ratify.

Thank you, Jane. It will be interesting to see what's reported after Dec 17.

The date has been changed to Nov 30

Thank you, Jane. It will be interesting to see what's reported after Dec 17.

Buckeye is a serious and real contender - IMHO - which means little to the deal. I think they offer a real chance for the STX facility to become world class.

Buckeye Partners, L.P. (NYSE: BPL) is a publicly traded master limited partnership and owns and operates a diversified network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, and marketing of liquid petroleum products. Buckeye is one of the largest independent liquid petroleum products pipeline operators in the United States in terms of volumes delivered with approximately 6,000 miles of pipeline and more than 120 liquid petroleum products terminals with aggregate storage capacity of over 110 million barrels across our portfolio of pipelines, inland terminals and an integrated network of marine terminals located primarily in the East Coast and Gulf Coast regions of the United States and in the Caribbean. Buckeye has a controlling interest in a company with a vertically integrated system of marine midstream assets in Corpus Christi and the Eagle Ford play in Texas. Buckeye’s flagship marine terminal, BORCO, is in The Bahamas and is one of the largest marine crude oil and refined petroleum products storage facilities in the world and provides an array of logistics and blending services for the global flow of petroleum products. Buckeye’s network of marine terminals enables it to facilitate global flows of crude oil, refined petroleum products, and other commodities, and to offer its customers connectivity to some of the world’s most important bulk storage and blending hubs. Buckeye is also a wholesale distributor of refined petroleum products in areas served by its pipelines and terminals. Finally, Buckeye also operates or maintains third-party pipelines under agreements with major oil and gas, petrochemical and chemical companies, and performs certain engineering and construction management services for third parties.

Buckeye and Arc Light already have a large presence here in the Caribbean with Buckeye being the leader. The purchase of HOV by Arc Light would flip that and put Arc Light at the lead. Buckeye owns the St Lucia terminal which is virtually empty (I'm told) and the only full time employees are the security guards. The concern being that Buckeye has no intention of doing anything with the facility, they just want to keep it out of Arc Lights hands.

Originally it was just the terminal/ tanks involved in the bidding but it now includes all above ground refinery assets. Sounds good until you realize that neither bidder has said they have any intention of refining and have both implied they will just tear it down.

Monday is the 30th. Should be interesting to see what news comes out. No matter what the legislature needs to wrap their heads around the idea that Chapter 7 is looming on the horizon if an agreement can't be reached with whom ever the buyer is.

So will Mapp be deposed before Nov 30? Will he be deposed at all? The fact that Buckeye laid off so many in St Lucia isn't a good sign for possible job creation on St Croix.

Good question. He was subpoenaed and was supposed to be deposed dec 10.

http://virginislandsdailynews.newspaperdirect.com/epaper/iphone/homepage.aspx?#_article57cad5ab-f1c9-4833-b0ec-9e89bc3e8d60/waarticle57cad5ab-f1c9-4833-b0ec-9e89bc3e8d60/57cad5ab-f1c9-4833-b0ec-9e89bc3e8d60//true

http://viconsortium.com/business/mapp-says-he-will-appear-before-judge-on-dec-17-in-delaware-will-make-landmark-announcement-next-week/

Consortium article was rife with wrong or misinterpreted information.

Consortium article was rife with wrong or misinterpreted information.

As usual. Notice how they never mention Monarch any more after campaining for them for the last 2 years?

You know I never got exactly why they were such Monarch cheerleaders until you pointed out the amt of paid space they had on VI Con. I do have to admit that their attempt to buy the Govt's lien was brilliant. Had it been allowed it would have really put them in the catbird seat. I think at this point it I'm leaning to hoping for Arc Light/LimeTree Bay. Buckeyes proposal is a larger number but not knowing how the proceeds are split makes me antsy.

On the one hand both entities implying that they are just going to tear the old girl down makes me sad, but then I consider that at least if they tear her down there will be a lot of work for probably quite a few years for people here. Letting it just sit and using only the tanks will provide some employment but the tear down and removal will be way more.

Do you remember how many tanks there were that need repair? That will also be a bit of an employment boom.

You know I never got exactly why they were such Monarch cheerleaders until you pointed out the amt of paid space they had on VI Con. I do have to admit that their attempt to buy the Govt's lien was brilliant. Had it been allowed it would have really put them in the catbird seat. I think at this point it I'm leaning to hoping for Arc Light/LimeTree Bay. Buckeyes proposal is a larger number but not knowing how the proceeds are split makes me antsy.

On the one hand both entities implying that they are just going to tear the old girl down makes me sad, but then I consider that at least if they tear her down there will be a lot of work for probably quite a few years for people here. Letting it just sit and using only the tanks will provide some employment but the tear down and removal will be way more.

Do you remember how many tanks there were that need repair? That will also be a bit of an employment boom.

There are very few that need repair. When every single tank was cleaned of all residue to meet the EPA requirements inspections revealed tanks in very good condition. It will mostly be testing and repair of all tanks by a company that specializes in that, then routine maintenance afterwards by on site staff.

I know this is a bit long, but it explains who said what to whom and what the various bids and positions were. It explains what the Judge is being asked to approve Monday morning...which is the sale of the assets to ArcLight.

That is a completely different question than the concession/operating agreement. Only the GVI can agree to a concession/operating agreement -- without which (as described below) the assets are almost worthless. I think it is safe to say that the GVI wants to be paid for the concession agreement in cash, up front.

Para. 22:

"the Governor’s representatives took the position that the Governor would not take any proposed concession agreement to the Legislature of the U.S. Virgin Islands (the “Legislature”) for approval absent an amount of the prospective sale proceeds being paid directly to the GVI at closing essentially as a fee and made an initial proposal. After the Debtor indicated that the proposal would not be accepted, and as a result of subsequent discussions, on November 3, 2015, the Governor’s representatives increased their offer to the Debtor to provide for the estate to retain $35 million and 10% of any proceeds in excess of $190 million."

And also:

"Critically, Buckeye had no concession agreement with the Governor and did not include any proposed allocation of the purchase price between the Debtor and the GVI. In addition, Buckeye’s revised bid added a closing condition that, to the extent the Federal Trade Commission (“FTC”) opens an investigation into Buckeye’s purchase of the Assets, Buckeye must be satisfied in its reasonable discretion that the FTC has concluded any such investigation into Buckeye’s purchase."

IN THE DISTRICT COURT OF THE VIRGIN ISLANDS
BANKRUPTCY DIVISION - ST. CROIX, VIRGIN ISLANDS

In re

Chapter 11 - HOVENSA L.L.C.,
Case No. 1:15-bk-10003-MFW

DECLARATION OF TIMOTHY R. POHL IN SUPPORT OF ENTRY OF THE ORDER (A)(I) APPROVING THE SALE OF THE DEBTOR’S ASSETS, FREE AND CLEAR OF ALL LIENS, CLAIMS, ENCUMBRANCES, AND INTERESTS; AND (II) AUTHORIZING THE ASSUMPTION AND ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND UNEXPIRED LEASES; AND (B) GRANTING RELATED RELIEF

I, Timothy R. Pohl, declare under penalty of perjury:

1. I am a Managing Director of the firm Lazard Frères & Co. LLC (“Lazard”), which has its principal office at 30 Rockefeller Plaza, New York, New York 10020.

QUALIFICATIONS

2. Lazard is the primary U.S. operating subsidiary of a preeminent international financial advisory and asset management firm. Lazard, together with its predecessors and affiliates, has been advising clients around the world for over 150 years. Lazard has dedicated professionals who provide restructuring services to its clients.

3. The current vice chairmen, managing directors, directors, vice presidents and associates of Lazard have extensive experience working with financially troubled companies in complex financial restructurings, both out-of-court and in Chapter 11 proceedings. Lazard and its professionals have been involved as advisor to debtors, creditors and equity constituencies, and government agencies in many reorganization cases. Since 1990, Lazard’s professionals have been involved in over 250 restructurings, representing over $1 trillion in debtor assets.

4. At Lazard, I have advised on numerous complex restructurings including United States Enrichment Corp., Longview Power, A123 Systems, Midwest Generation (bondholders), GMAC/Residential Capital, Capital Source, Highland Hotels, Opti Canada, Westgate Resorts, Clear Channel Outdoor, and Xerium Technologies, among others.

5. Prior to joining Lazard, I was co-leader of Skadden, Arps, Meagher & Flom’s worldwide corporate restructuring practice where I was involved in a variety of in-court and out- of-court restructurings. I led the chapter 11 cases of a number of major corporations, including National Steel, ICG Communications, McLeod USA, Radnor Holdings, VeraSun Energy and Diamond Brands. I also led successful out-of-court restructurings for companies across many industries, including Meridian Technologies, Reliant Resources, ITCDeltaCom, Rural Cellular Communications, American National Power, InterGen, and Krispy Kreme in the restructuring of its troubled franchisees. * * *

I. Pre-Petition Marketing and Sale Efforts
A. Pre-Petition Marketing Process

6. The previous marketing and sale efforts of the Debtor and Lazard are chronicled in the Declaration of Andrew Chang in Support of the Debtor’s Motion For Entry of Orders (A)(I) Establishing Bidding Procedures Relating to the Sale of the Debtor’s Assets, Including Approving Break-Up Fee and Expense Reimbursement, (II) Establishing Procedures Relating to the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, Including Notice of Proposed Cure Amounts, (III) Approving Form and Manner of Notice Relating Thereto, and (IV) Scheduling a Hearing to Consider the Proposed Sale; (B)(I) Approving the Sale of the Debtor’s Assets Free and Clear of All Liens, Claims, Encumbrances, and Interests, and (II) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (C) Granting Related Relief [Docket No. 15-3] and the Supplemental Declaration of Andrew Chang in Support of the Debtor’s Motion For Entry of Orders (A)(I) Establishing Bidding Procedures Relating to the Sale of the Debtor’s Assets, Including Approving Break-Up Fee and Expense Reimbursement, (II) Establishing Procedures Relating to the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases, Including Notice of Proposed Cure Amounts, (III) Approving Form and Manner of Notice Relating Thereto, and (IV) Scheduling a Hearing to Consider the Proposed Sale; (B)(I) Approving the Sale of the Debtor’s Assets Free and Clear of All Liens, Claims, Encumbrances, and Interests, and (II) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (C) Granting Related Relief [Docket No. 175] (the “Supplemental Chang Declaration”).

For the Court’s convenience, I briefly summarize those efforts here.

7. Since November 2013, Lazard has been marketing the Debtor’s refinery business through its New York City, Houston, and Paris offices. In connection with its initial attempts to sell the Debtor’s assets, Lazard contacted over one-hundred forty parties in order to capture a wide group of potential buyers. Through our extensive efforts, Lazard was able to identify potential viable buyers, some of whom initially expressed interest in purchasing all of the Debtor’s assets. Ultimately, only four parties submitted preliminary bids, of which only two were conforming preliminary bids. Lazard then held discussions with the two bidders in an effort to encourage the parties to improve their preliminary bids, but one of the bidders decided to withdraw from the process by not submitting a final bid.

8. The Lazard team, the Debtor, and the Debtor’s other professionals subsequently engaged in negotiations with the remaining bidder, ABR, and negotiated a substantially final form of a purchase and sale agreement, which was subject to the completion of negotiations of an operating agreement governing the rights and obligations of the GVI and ABR with respect to ABR’s planned operation of the Debtor’s refinery following its purchase. The ABR Operating Agreement was then separately negotiated and executed between the GVI and ABR. However, the former USVI Senate rejected the proposed ABR Operating Agreement, which effectively rejected the ABR Sale Transaction, on December 19, 2014 by a vote of 13-2.

9. Following the USVI Senate’s rejection of the proposed ABR Operating Agreement, the Debtor instructed Lazard to undertake another full sale and marketing process, which began in April 2015 and focused on selling the Terminal Assets in addition to the Debtor’s
above-grade refinery assets (the “Refinery Assets”). Lazard contacted thirty-two potential purchasers, seventeen of which executed a non-disclosure agreement and received access to a virtual data room to conduct due diligence. Thereafter, eleven interested parties conducted site visits of the facility.

10. As a result of these marketing efforts, Lazard secured four preliminary bids in May 2015. Thereafter, Lazard, the Debtor, and the Debtor’s other professionals engaged in further discussions with the potential purchasers regarding the terms of a purchase agreement and other ancillary agreements, remaining legal and financial due diligence necessary to consummate a transaction, and the process for negotiating an operating agreement with the GVI.

11. Ultimately, negotiations with the interested parties resulted in the Debtor’s execution of the Stalking Horse Agreement on September 4, 2015, whereby Limetree Bay agreed to purchase the Terminal Assets for $190 million and act as a stalking horse bidder in a Court- supervised auction.

B. Buckeye Partners, L.P.

12. Buckeye Partners, L.P. (“Buckeye”) was one of the parties that previously
expressed interest in acquiring the Debtor’s Terminal Assets during the pre-petition marketing process. As detailed in the Supplemental Chang Declaration, the Debtor and Lazard engaged in discussions and negotiations with Buckeye between April 2015 and the Debtor’s execution of the Stalking Horse Agreement in September 2015. After Buckeye initially expressed interest in purchasing the Debtor’s Terminal Assets, it executed a confidentiality agreement with the Debtor and was given access to the Debtor’s virtual dataroom. Thereafter, Buckeye conducted due diligence on the Debtor’s assets, but ultimately decided not to submit a bid before a May 19, 2015 bid deadline. After Buckeye missed the bid deadline, Lazard had limited correspondence with Buckeye until late July when Buckeye expressed renewed interest in a potential acquisition of the Terminal Assets and requested access to the Debtor. At that point, the negotiations had progressed with the Stalking Horse Bidder to the point that definitive documentation was being exchanged among the parties and their professionals. Buckeye ultimately made an initial offer for the Terminal Assets in early August that Lazard and the Debtor believed was competitive. As a result, the Debtor, through Lazard, indicated its willingness to allow Buckeye to complete confirmatory due diligence and to engage with Buckeye on definitive documentation in order to foster a competitive bidding environment between Buckeye and the Stalking Horse Bidder.

13. In late August, however, although initial drafts of definitive documentation had been exchanged, Buckeye informed Lazard that it was reducing its initial bid. Shortly thereafter, Lazard encouraged Buckeye to increase its bid and agree to an accelerated timeline proposed by the Debtor to consummate a sale transaction due to the Debtor’s liquidity constraints. Buckeye failed to respond to Lazard’s requests in a timely fashion.

14. After Lazard informed Buckeye that the Debtor would be executing an asset purchase agreement with the Stalking Horse Bidder, Buckeye contacted Lazard and expressed an interest in revising its bid and accelerating discussions around definitive documentation for Buckeye’s acquisition of the Terminal Assets. No subsequent documentation was exchanged between the Debtor and Buckeye and the next communication the Debtor received from Buckeye was its objection to entry of the Bidding Procedures Order. See Docket No. 120.

II. Pre-Auction Marketing Process

15. Following entry of the Bidding Procedures Order, the Debtor continued to pursue a further open, transparent, and thorough marketing effort to ensure the Debtor would receive the highest possible value for its Assets. To assist in this process, Lazard contacted approximately thirty-six entities that Lazard believed would have an interest in purchasing the Debtor’s Assets. Lazard also created a list of potential bidders that included two categories of interested parties: (i) those expressing an interest in acquiring the Terminal Assets and/or the Refinery Assets as an operating business, and (ii) those expressing an interest in acquiring all or select Refinery Assets for liquidation purposes.

16. Lazard then approached each of the potential bidders on the potential purchaser list to gauge their interest in pursuing a sale transaction for the Debtor’s Assets. Twenty-three of those entities signed Confidentiality Agreements and eight received investor presentations describing the Assets and were granted access to an electronic data room containing diligence materials. After an initial diligence period, five conducted on-site visits of the Debtor’s property.

17. Following these visits, Lazard continued discussions with each of the interested parties on the potential terms and conditions of a sale transaction. These discussions were designed to provide the Debtor and its advisors with information necessary to evaluate prospective bids the Debtor might receive from each potential purchaser, including assisting the Debtor in assessing value to the estate, gauging the level of interest of each prospective purchaser, and evaluating whether a sale to each of the purchasers could in fact be consummated.

18. On or before the Bid Deadline on November 5, 2015, the Debtor received two bids on the Terminal Assets: (i) the stalking horse bid previously submitted by Limetree Bay for $190 million; and (ii) a bid from Buckeye for $198.6 million (which bid satisfied the Overbid Amount, including the Bid Protections awarded to Limetree Bay, in the Bidding Procedures). The Debtor also received nine bids from parties interested in purchasing and liquidating the Refinery Assets (collectively, the “Refinery Bids”), as well as proposals from Capswell Energy Co. (“Capswell”) and Monarch Energy Partners, Inc. (“Monarch” and the proposal submitted by Monarch, the “Monarch Proposal”). The Refinery Bids contemplated various transaction structures for the liquidation of the Debtor’s Refinery Assets, including offers to assume asbestos and/or environmental liabilities or enter into a cost and profit sharing contract that would provide the Debtor with a percentage of the sales obtained through the liquidation of the Refinery Assets.

19. After numerous discussions with the Consultation Parties and conducting a full analysis of the bids received, the Debtor determined that: (i) the bids submitted by Buckeye and three of the refinery bidders constituted Qualified Bids, and (ii) the bids submitted by the remaining six refinery bidders, Capswell, and Monarch did not constitute Qualified Bids. Only Qualified Bidders were entitled to participate in the Auction.

III. The Role of the Governor and the GVI in the Debtor’s Sale Process

20. Throughout the pre- and postpetition marketing processes, the Debtor has been cognizant of the critical role that the Governor of the U.S. Virgin Islands (the “Governor”) and the GVI play in the Debtor’s sale process and the Debtor’s ability to consummate a Sale Transaction with any purchaser. It is my understanding that a Sale Transaction cannot be consummated without the support of the Governor and the GVI for several reasons. First, it is highly unlikely that a potential purchaser would be interested in acquiring the Debtor’s Assets absent a tax concession agreement with the GVI that provides the purchaser with tax benefits in exchange for its agreement to operate the business on St. Croix. Second, it is also unlikely that a purchaser would be willing to consummate a transaction without the necessary governmental permits and authorizations required for the purchaser to operate the Debtor’s business. Accordingly, the Stalking Horse Agreement requires execution and ratification of a new “USVI Concession Agreement” between the GVI and the purchaser as a condition to consummation of the Sale Transaction. See Stalking Horse Agreement 8.1(f). No potential purchaser with whom the Debtor had discussions about purchasing the Debtor’s Assets on an operating basis indicated a willingness to close a transaction absent such agreements with the GVI. Given these facts, the Governor and the GVI play a key role in the approval and consummation of a Sale Transaction.

21. In recognition of this reality, the Debtor and its professionals and the Debtor’s joint venture partners and their professionals participated in numerous meetings and conference calls with the Governor’s representatives over the past several months regarding the sale process. The meetings and conference calls were designed to keep the representatives for the Governor apprised of all material developments during the sale process, encourage discussions between the Governor and the potential bidders on the terms of a Sale Transaction that would be acceptable to the Governor, and accelerate the process for obtaining a concession agreement between the purchaser and the GVI. The Debtor and the Debtor’s joint venture partners also provided the Governor’s representatives with due diligence necessary for the Governor to “vet” the potential bidders and assess, among other things, the potential bidder’s financial and operational wherewithal to purchase and/or operate the Debtor’s Assets.

22. Following entry of the Bidding Procedures Order on October 9, 2015, the Debtor and its professionals and the joint venture partners and their professionals met with the Governor’s representatives in person and telephonically on several occasions to discuss the sale process and the Debtor’s future wind down plans. At an in-person meeting held in New York on October 30, 2015, the Governor’s representatives took the position that the Governor would not take any proposed concession agreement to the Legislature of the U.S. Virgin Islands (the “Legislature”) for approval absent an amount of the prospective sale proceeds being paid directly to the GVI at closing essentially as a fee and made an initial proposal. After the Debtor indicated that the proposal would not be accepted, and as a result of subsequent discussions, on November 3, 2015, the Governor’s representatives increased their offer to the Debtor to provide for the estate to retain $35 million and 10% of any proceeds in excess of $190 million. This proposal did not provide enough proceeds to the Debtor to pay the debtor-in-possession loan and estimated administrative expenses. The Governor’s view was that any additional funds needed by the Debtor to pay administrative claims or provide any recovery to unsecured creditors should be paid by other parties, such as the Debtor’s joint venture partners. The Debtor took the position that it would not accept a proposal that did not provide sufficient proceeds to cover budgeted administrative expenses and provide a meaningful distribution to unsecured creditors. Thus, the Debtor proposed that the Auction proceed, competitive bidding occur, and that negotiations regarding allocation of sale proceeds be deferred until the final amount of the highest and best bid could be obtained and known. No agreement was reached.

23. On November 9, 2015—the day before the Auction was to commence—the Governor’s representatives informed the Debtor and the Debtor’s joint venture partners of multiple developments relating to the Debtor’s sale process. First, the Governor’s representatives informed the Debtor, the Debtor’s joint venture partners, and Buckeye that the Governor had reached an agreement in principle with Limetree Bay on the terms and conditions of a concession agreement, which agreement would be presented to the Legislature for ratification. Second, the Governor’s representatives indicated that the Governor would no longer negotiate with Buckeye as part of the Debtor’s sale process due to his selection of Limetree Bay as the preferred partner and, as a result, the Governor’s representatives did not believe there was a need for the Debtor to conduct the Auction the next day. Third, the Governor’s representatives notified the Debtor that they would not be attending the Auction, despite the Debtor’s urging them to attend. Their proposal for allocation of funds had not changed. After discussing the Governor’s position with the Consultation Parties and Limetree Bay, along with the full support of the Committee, the Debtor elected to go forward with the Auction as scheduled.

IV. The Auction Process

24. In the days leading up to the Auction, the Debtor, in the exercise of its business judgment, and after consulting with the Consultation Parties, determined that the Limetree Bay bid would serve as the Leading Bid at the Auction. Lazard provided the Executive Committee with an analysis of the bids received before the Bid Deadline to assist the Executive Committee with its decision regarding which of the Qualified Bids to designate as the Leading Bid. The analysis included a summary of the material financial terms of the Qualified Bids and identified the contingencies associated with approval and consummation of each bid.

25. The Auction took place on November 10-11, and 16, 2015 in person at the offices of White & Case in New York, New York, and continued on November 19, 2015 via teleconference. The Debtor conducted the Auction with the goal of improving bids to the level that would provide both sufficient proceeds for the Debtor’s estate to cover all administrative expenses plus a meaningful recovery to unsecured creditors and satisfy the GVI’s payment requirements.

26. At the outset of the Auction on November 10th, Limetree Bay modified its bid on the record and announced that it would be submitting an offer for the purchase of the Debtor’s Refinery Assets and would assume certain liabilities in connection with those assets. Limetree Bay confirmed that it had reached an agreement in principle with the Governor on the terms of a concession agreement, which included a cash payment to the GVI, a commitment regarding the potential start up of certain of the Debtor’s refinery units, and provided the GVI with additional benefits. The Governor’s proposal to the Debtor to allow the Debtor to receive only $35 million from the purchase price remained the same.

27. Following Limetree Bay’s announcement on the record that it was amending its bid and the asset purchase agreement to reflect the revised terms, the Debtor’s professionals engaged in numerous off-the-record discussions with Limetree Bay and Buckeye to clarify certain aspects of Limetree Bay’s revised bid. Buckeye then requested clarification on certain details of the revised bid and Limetree Bay responded by answering Buckeye’s questions on the record. After considering Limetree Bay’s responses, Buckeye amended its bid to match aspects of the bid made by Limetree Bay, including the agreement to purchase the Debtor’s Refinery Assets, and increased its proposed purchase price to $300 million, consisting of $280 million in cash consideration and assumption of up to $20 million in administrative claims. Critically, Buckeye had no concession agreement with the Governor and did not include any proposed allocation of the purchase price between the Debtor and the GVI. In addition, Buckeye’s revised bid added a closing condition that, to the extent the Federal Trade Commission (“FTC”) opens an investigation into Buckeye’s purchase of the Assets, Buckeye must be satisfied in its reasonable discretion that the FTC has concluded any such investigation into Buckeye’s purchase.

28. Negotiations with all parties continued as the Debtor sought to convince Limetree Bay and the Governor to increase their respective proposals to provide the Debtor with a greater recovery. At some point, the Governor agreed to increase the amount of proceeds to the Debtor in the Limetree Bay bid from $35 million to $55 million. The Debtor also attempted to have Buckeye agree to provide information about its pre-Auction negotiations with the Governor to allow the Debtor to better assess the likelihood that an agreement could ever be reached with the Governor and, if so, how proceeds might plausibly be allocated. The Debtor’s professionals met with the Committee’s advisors on multiple occasions during the Auction in an effort to detail for the Committee the Debtor’s view of how the sale proceeds may be allocated in various scenarios. These scenarios included analysis of both pre-closing administrative claims as well as post- closing additional costs to be borne by the Debtor’s estate.

29. On the morning of November 11th, the Debtor and the Debtor’s joint venture partners
met in person with the Governor’s representatives to provide an update on the bidding process and to encourage the Governor to engage with Buckeye on the terms and conditions of a Sale Transaction. At this meeting, the Debtor and the joint venture partners also discussed the waterfall analysis prepared by the Debtor to illustrate the levels of sale proceeds the Debtor required to avoid administrative insolvency and provide a meaningful recovery to unsecured creditors. The Debtor and its advisors also continued to have multiple off-the-record conversations with the bidders, although no new bids were made on the record of the Auction on November 11th. At the conclusion of the day, Limetree Bay circulated an updated asset purchase agreement reflecting its revised bid and the Debtor adjourned the Auction to November 16th in order to continue negotiations with its joint venture partners, the Governor’s representatives, the Committee, and the bidders.

30. Following several days of discussions and negotiations between the Debtor, Limetree Bay, Buckeye, the Consultation Parties, and the Governor’s representatives, the Auction continued on November 16th. In sum, Limetree Bay and the Governor had agreed that
$80 million of the $190 million sale price under the Limetree Bay proposal would be paid to the Debtor’s estate. The allocation of cash to the Debtor of $80 million represented an increase of approximately $45 million from the commencement of the Auction. Limetree Bay also further revised to its bid provide for: (a) assumption of up to $20 million of the Debtor’s post-closing out-of-pocket wind-down costs and expenses and (b) an agreement to supply the Debtor with power to the extent that the minimum turndown amount of the power plant is greater than the electricity load used by Limetree Bay, free of charge. Buckeye had also increased its offer but still had not succeeded in conducting any further negotiations with the Governor, nor did its proposal provide any means for the Debtor to assess what proceeds it would potentially obtain even assuming the Governor altered his position and agreed to enter into a concession agreement with Buckeye.

31. The Auction then continued on November 19th with both Buckeye and Limetree Bay making further amendments to their respective bids. Buckeye modified its bid to match Limetree Bay’s agreement to provide the Debtor with free power to the extent that the power generated by the power plant exceeded the power that was necessary for Buckeye to operate the assets. Limetree Bay further amended the allocation in its bid to provide the Debtor with an additional $10 million of sale proceeds, either through an increase in the amount of sale proceeds to be distributed to the Debtor (from $80 million to $90 million) or an increase in the amount of post-closing wind-down expenses that Limetree Bay would agree to reimburse (from $20 million to $30 million), at the Debtor’s option. It was confirmed on the record at the Auction that the Governor supported the reallocation of the purchase price away from the GVI. Limetree Bay also further amended its bid to provide the Debtor with the first $15 million of additional power free of charge.

32. Buckeye then further amended its bid to match Limetree Bay’s bid to provide the Debtor with the first $15 million of power free of charge. Buckeye also increased the consideration in its bid to a total of up to $390 million, which included the reimbursement of $20 million of post-closing wind-down expenses. Following a short recess, Buckeye further revised its bid downward of up to $365 million, but included an agreement to assume the Debtor’s pension obligations provided that the pension plan is not terminated. Prior to the conclusion of the Auction, I requested that Buckeye remove the FTC condition embedded in its bid. However, Buckeye elected not to do so.

33. The material terms of the final bids made by Limetree Bay and Buckeye are summarized as follows:

• Limetree Bay:
i. purchase price of $210 million consisting of: (a) $100 million of cash to the GVI essentially as a fee, (b) $90 million to the Debtor’s estate, and (c) up to
$20 million of reimbursement of post-closing wind-down costs and expenses;
ii. an agreement to provide the Debtor with free power after the closing to the extent that the minimum turndown amount of power exceeds the power generation load used by Limetree Bay to operate its business, and the first $15 million of additional power for which the Debtor would have otherwise paid free of charge under a power supply services agreement to be entered into at closing; and
iii. an agreement with the Governor on a concession agreement to be taken to the Legislature, which agreement contains additional payments and other financial consideration to be paid by Limetree Bay to the GVI on terms unknown to the Debtor.
• Buckeye:
i. purchase price of $365 million, consisting of: (a) $345 million in cash consideration; and (b) assumption of $20 million in post-closing wind-down expenses, with the amount of such proceeds to be paid to the GVI and the Debtor, respectively, unknown;
ii. assumption of the Debtor’s pension obligations;
iii. an agreement to provide power to the Debtor free of charge to the extent the minimum power generated by the Debtor’s power plant exceeds the power that is necessary for Buckeye to operate the assets and the first $15 million of additional power for which the Debtor would have otherwise paid free of charge; and
iv. no agreement with the Governor on a concession agreement or otherwise.

V. Lazard’s Recommendation and the Debtor’s Selection of the Successful Bidder

34. Following the conclusion of the Auction and consultations with the Committee, Lazard recommended to the Executive Committee that it select the Limetree Bay bid as the Successful Bid and the Buckeye bid as the Backup Bid in accordance with the Bidding Procedures. To illustrate its analysis and assist the Executive Committee in making a decision, Lazard provided the Executive Committee with a summary of the bids and an assessment of the risks, benefits, and conditionality associated with each bid. Lazard’s summary included an illustrative allocation of sale proceeds to creditors based on various assumptions including, but not limited to, how much of the sale proceeds would be allocated to the GVI as part of the GVI’s approval process.

35. Lazard’s recommendation was based on a holistic view of the bids, which included a weighing of the economic aspects of the bids and the additional conditionality in the Buckeye bid above the conditionality associated with the Limetree Bay bid. While the Limetree Bay proposal is subject to legislative approval of a concession agreement, that agreement has been reached between Limetree Bay and the Governor. In contrast, the Governor’s representatives have been steadfast that the Governor has already attempted to negotiate with Buckeye and has determined to proceed only with Limetree Bay due to his belief that Limetree Bay was the better partner for the residents of the U.S. Virgin Islands. It is my understanding that the Governor’s decision is based, at least in part, on aspects of Limetree Bay’s operating plans that the Governor believes will create more jobs on St. Croix and provide additional revenues to the island compared to Buckeye’s. Buckeye’s bid also has additional conditionality in the form of a closing condition relating to antitrust matters if Buckeye is selected as the Successful Bidder and an investigation is launched by the FTC. As previously described, Buckeye elected not to strike this condition from its final bid, notwithstanding the Debtor’s specific request that it be removed. Limetree Bay’s bid contained no such condition.

36. Finally, in light of the fact that the Governor did not have an agreement with Buckeye and has indicated that he never will, the economics of the Buckeye bid to the Debtor are uncertain at best and completely illusory at worst. There is simply no way to know how much of Buckeye’s “purchase price” would ever inure to the benefit of the estate if Buckeye and the Governor have no agreement on a concession agreement or putative sale proceeds allocations. In contrast, the proceeds allocable to the estate in the Limetree Bay bid would be sufficient to pay the $40 million debtor-in-possession financing claims, fund estate administrative costs through closing (estimated at approximately $20 million), and provide approximately $30 million for distribution to unsecured creditors.

37. I believe the postpetition marketing and sale process was conducted appropriately under highly unusual circumstances and has been a success for the Debtor and its stakeholders. Proceeds to the estate under the Limetree Bay bid increased from $35 million to $110 million as a result of conducting the Auction and the negotiations that occurred in connection therewith. In addition, Limetree Bay agreed to concessions relating to the provision of power that reduce the Debtor’s operating costs during the wind-down of this estate post-closing, which are valued at over $15 million. Moreover, HOVIC has agreed to pay up to $10 million of additional post- closing wind-down expenses. In total, therefore, the Auction resulted in over $100 million of incremental value for the Debtor compared to under the initial agreement reached between Limetree Bay and the Governor.

38. After discussing with the Consultation Parties, the Debtor, in the exercise of its business judgment, determined that the Limetree Bay bid represented the highest and best bid and declared Limetree Bay the winner of the Auction and the Successful Bidder. After the Auction closed, the Debtor worked with Limetree Bay to conform the terms of the asset purchase agreement to reflect the modifications made during the bidding process at the Auction.

VI. Further Discussions and Negotiations With the Committee

39. Following the conclusion of the Auction and the November 17th status conference where the Debtor informed the Court that it had selected Limetree Bay as the Successful Bidder, and in light of ongoing objections by the Committee, the Debtor’s professionals continued negotiations and discussions with the Governor’s representatives and the Committee. As part of these discussions, HOVIC or its affiliates offered to assume the Debtor’s ongoing pension liability, the effect of which significantly reduces the pool of unsecured claims against the estate, in exchange for the Committee’s support for estate releases under a to-be-filed plan of liquidation, and the support of the Committee for the Sale Transaction. HOVIC and the Debtor’s representatives presented this proposal to representatives of the Committee on November 25, 2015. After further discussions, the Committee indicated its support for the Sale Transaction with Limetree Bay.

VII. Monarch Energy Partners, Inc.

40. Monarch, as a party that has previously expressed interest in acquiring the Debtor’s Assets, is well known to the Debtor and Lazard. Monarch first expressed interest in acquiring the Debtor’s Assets in September 2014 during the time that Lazard and the Debtor were negotiating and seeking approval of the ABR Sale Transaction. Following rejection of the ABR Sale Transaction, Monarch contacted Lazard to reiterate its interest in purchasing the Debtor’s Assets. From January through June 2015, Monarch contacted Lazard no fewer than nine different times regarding the Debtor’s Assets. Thereafter, on May 8, 2015, Monarch executed a non-disclosure agreement, which it attempted to terminate on June 10, 2015. Lazard last contacted Monarch on October 15, 2015 following entry of the Bidding Procedures Order. Monarch has also made several public statements of interest with respect to restarting the Debtor’s refinery operations prior to and during the pendency of this chapter 11 case.

41. On August 11, 2015, Monarch submitted a formal written proposal to purchase the first priority mortgage and security agreement, each dated May 28, 2014 (the “First Priority Mortgage”), from the GVI, which was subsequently amended on September 3, 2015. However, the GVI officially rejected Monarch’s proposal pursuant to the letter of counsel for the GVI to Monarch dated October 29, 2015. See Docket No. 288, Ex A. By this letter, the GVI has stated that it “is not interested in any such proposals” for the purchase of the First Priority Mortgage.

42. On November 4, 2015, the Debtor received the Monarch Proposal prior to the Bid Deadline. Among other things, the Monarch Proposal consisted of a $40 million cash component to satisfy the GVI’s claim and the assumption of environmental liabilities, but did not offer any cash consideration to the Debtor’s estate. Monarch also failed to execute a Confidentiality Agreement or provide reasonable evidence demonstrating its financial capability to consummate the Monarch Proposal. Bidding Procedures at 2 (“To participate in the bidding process and receive access to due diligence . . . a party must submit to the Debtor (i) an executed confidentiality agreement . . . and (ii) reasonable evidence demonstrating the party’s financial capability to consummate a Sale Transaction as reasonably determined by the Debtor, in consultation with the advisors to and representatives of HOVIC and PDVSA V.I., Inc.”). As a result, the Debtor, with the support of the Committee, determined that Monarch was not a Qualified Bidder and that its bid was not a Qualified Bid. See Bidding Procedures Order at 3-4. The Monarch Proposal was also not accompanied by, among other things, an executed asset purchase agreement, any evidence of Monarch’s financial ability to consummate a transaction or a good faith deposit, each as required under the Bidding Procedures. As a result, the Debtor, again with the support of the Committee, concluded that Monarch was not permitted to participate in the Auction.

VIII. Conclusion

43. Based on the foregoing, I believe the proposed sale to Limetree Bay is the highest and best bid available at this time for the Debtor’s Assets and should be approved.

Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief.
Dated: November 27, 2015
/s/ Timothy R. Pohl
Chicago, Illinois
Timothy R. Pohl Managing Director Lazard Frères & Co. LLC

Thank you. That filled in a lot of holes for me.

No problem ! Always best to read the actual documents. I know others have posted this, but all of the docs can be read on:

Prime Clerk Website with HOVENSA Bankruptcy Docket

Carl