TPC EBITDA outlook dims following plant closure; 4Q20 and 2020 results decline

TPC Group recently disclosed to investors the extent to which it expects the February winter storms to impact 2021 earnings, according to three sources familiar with the situation. 

One of the company’s facilities was closed for roughly six weeks due to the storm, the sources continued. The closure is expected to lead to a USD 60m EBITDA impact in 2021, two of the sources added. 

The company’s business interruption and property insurance policy is estimated to be worth USD 850m, as reported. However, investors are concerned the insurance policy does not extend to the impact from the winter storm, one of the sources added. 

For 4Q20, TPC generated USD 11.4m of adjusted EBITDA, down 80% year-over-year, the sources said. For the year, the company posted USD 46m of adjusted EBITDA, compared to USD 231.5m in 2019. 

Revenue for 4Q20 came in at USD 209.4m, compared to USD 334.8m in 4Q19, one of the sources said. For the year, revenue came in at USD 751.4m, compared to USD 1.464bn in 2019, they added. 

In February, TPC tapped the market for USD 153m 10.875% super-priority notes due 2024 to replenish liquidity and refinance a USD 70m loan set to mature in August of this year, which was provided last year by Apollo Management as a bridge to business interruption insurance proceeds.

Over the longer term, the First Reserve and SK Capital-owned petrochemical producer has to address the loss of its main earnings generator, the Port Neches facility in Texas that exploded in November 2019. Since the explosion and the onset of the COVID-19 pandemic, the company has struggled to revive earnings and continued to burn cash, as reported.

Pro forma the February deal, the company has roughly USD 94m of liquidity, two of the sources added. One of the sources expects the company to burn roughly USD 200m in 2021.

The USD 930m 10.5% senior unsecured notes due 2024 traded down to 90.5 to yield 14.146% on 24 March after the earnings report, from trades at 94.25 to yield 12.633% on 11 March, according to MarketAxess. The notes last traded at 90.75 to yield 14.069% on 5 April.  

TPC Group did not respond to a request for comment. First Reserve and SK Capital did not respond to requests for comment.

2021 Debtwire

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