Metro Fuel Oil Heads to Bankruptcy Court for Quick Debt Relief
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Metro Fuel Oil Heads to Bankruptcy Court for Quick Debt Relief

October 17, 2012


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Metro Fuel Oil Co., a provider of heating oil and air conditioning services in New York, is filing for Chapter 11 bankruptcy, but a major investment is in the works, according to a report from Bloomberg Businessweek.

Sources say that the closely held company is filing for bankruptcy with the expectation that billionaire real estate mogul Sam Zell will put a large investment into the company.

Zell, however, is planning to purchase the company and sell it within 90 days, although the company would remain in business, albeit under different ownership.

The bankruptcy filing was made necessary by the company’s large debt load, which tops $100 million, according to its court filing. With only $50 million in assets, Metro Fuel Oil had little choice but to turn to bankruptcy.

In order to continue its operations during bankruptcy, the company told the court that it is looking to borrow $10 million in emergency funding. And as winter approaches, the company’s vast portfolio of customers will certainly appreciate its continued solvency.

Much of Metro Fuel Oil’s debt is attributable to its construction of a new biodiesel plant that will help the company in the long run, but cost it a fortune initially.

The construction helped accrue more than $10 million in debt for the heating oil company, and another $48 million of bank debt eventually pushed the company into bankruptcy court. In addition to the parent company, Metro Fuel Oil, nine subsidiaries of the company have also sought bankruptcy protection.

Sources say that Sam Zell is expected to extend the $10 million loan needed to continue the company’s short-term operations, although the loan will be based on the expectation that the company will be sold during the bankruptcy proceedings.

Zell, according to sources, is looking to find assets for his troubled private equity fund, Equity Group Investments LLC. And Zell himself is no stranger to bankruptcy, as he sought bankruptcy help for his distressed newspaper assets a few years ago.

In recent years, Zell’s group has invested in other energy companies, including Energy Futures Holding Corp., and it has also extended financing to companies as diverse as Blockbuster, Domino’s Pizza, and Marriott International.

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