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Duane Morris Team Leads $440M Loan for St. Croix Refinery Site
When a former Hess Corp. oil refinery in St. Croix, U.S. Virgin Islands, shut down in 2012, the closing devastated the Caribbean island economy.
But new activity at the site has begun, and two lawyers in Duane Morris' Miami office represented Barclays Bank PLC in a $440 million loan transaction to bring the complex back on line, albeit repurposed.
The complex isn't expected to ever rehire the up to 5,000 people, including contractors, it once employed. But the transaction brings hope to thousands on the island still suffering from the economic downturn set off by the shutdown.
Limetree Bay Terminals LLC, a portfolio company of the ArcLight Capital hedge fund, bought the oil terminal at auction in late 2015. Duane Morris' client, Barclays Bank, together with Morgan Stanley Senior Funding Inc., were lead arrangers and book runners on the $440 million term loan for Limetree.
For Duane Morris Miami partner Miles Plaskett, a native of St. Croix, working on the transaction had a "definite personal element." He and partner Scott Andrew advised Barclays on U.S. Virgin Islands law, conducted due diligence on real estate issues and prepared financing and securities documentation for the transaction.
The deal runner for Barclays was a team from Milbank, Tweed, Hadley & McCloy.
The firm representing the borrower, Limetree Bay, was Nichols, Newman, Logan, Grey & Lockwood, where Plaskett started his legal career.
"It definitely had a personal impact on me," Plaskett said. "I was very happy to get the deal done and happy to see something positive happening on the island where I was born and raised. The urgency was there to get it done."
The refinery built in the 1960s and later owned by Hovensa, a joint venture between Hess and the government-owned oil company in Venezuela, was a staple of the St. Croix economy until 2012. A bankruptcy action followed, and Limetree Bay became the new owner.
At the height of its activity, the refinery and its subcontractors may have employed as much as a tenth of the island's population of 50,000, Plaskett said. As the refinery shrank and then closed, restaurants and stores that served the employees suffered as well, school enrollment fell as families moved away and more people lost jobs. The government still hasn't recovered from the property and corporate tax losses, Plaskett said.
After the loan closed Feb. 15, Limetree was expected to strengthen and expand the operations at the deepwater port. It's already leasing storage space to the Chinese state oil company Sinopec to store oil and fuel for distribution.
Starting last November, Duane Morris' due diligence work on the project included poring over a more than foot-tall stack of agreements and legislation between Hess and the government of the Virgin Islands that dated back to 1965. A new operating agreement was negotiated by the governor and approved by the U.S. Virgin Islands Legislature. Among other things, it allows Limetree to operate the storage facility, try to restart the refinery, employ residents and receive tax incentives. It also entitles the company to lease new land created from dredge fill.
The refinery site and previously submerged land on Limetree Bay had to be identified and described for the loan and the correct owner identified. Plaskett and Andrew had to sort loan security issues as well as the rights and obligations of the borrower, which enabled the government to subordinate its lien. The owners must employ a minimum of 80 U.S. Virgin Islands residents, but Plaskett expects it to be more.
"This facility is so big and they have so many assets there at the facility that they can do so many things. They can find other ways to use it," said Plaskett, who moved to South Florida in 1997 after working nine years as a lawyer in St. Croix, following college and law school at Georgetown University. "There's a really sophisticated deepwater port."
Plaskett, who focuses his practice on corporate, municipal and project finance with an emphasis on renewable energy, infrastructure and development projects, sees the complex as a potential transshipment point for liquefied natural gas and propane and where larger container ships can shift cargo to smaller ships. Although he doesn't expect the site to return to large-scale heavy crude refining, other industrial uses such as storing airplane fuel are an option, he said.
In addition to Plaskett and Andrew, international tax partner William Rohrer of Duane Morris' Miami office advised on the deal.
Hunter Logan, a partner at Nichols Newman, where Plaskett began his legal career, represented Limetree Bay Terminals.
The Barclays team at Milbank, Tweed, Hadley & McCloy in New York included partner Jonathan Green, of counsel Bruce Gardner, and associates Jeffrey Leider and Carolyn Miller.