Heating Oil Partners Income Fund

Heating Oil Partners Income Fund

September 26, 2005 08:28 ET

Heating Oil Partners Income Fund Announces Chapter 11 Filing By Operating Subsidiary

TORONTO, ONTARIO--(CCNMatthews - Sept. 26, 2005) - Heating Oil Partners Income Fund (the "Fund")(TSX:HIF.UN) announced today that the Fund's operating subsidiary, Heating Oil Partners, L.P. ("HOP" or the "Company") filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The Company also will be seeking recognition of the Chapter 11 proceedings under the Companies' Creditors Arrangement Act (Canada) (the "CCAA"). Both the U.S. and Canadian filings include Heating Oil Partners, G.P. Inc., the Company's general partner, and HOP Holdings, Inc., a 100% subsidiary of the Fund and an 88.1% owner of the Company. The Fund is not directly a party to any of these filings.

HOP stated that it intends to maintain all normal business operations throughout the bankruptcy process. Specifically, HOP expects to continue:

- Delivering heating oil and other petroleum products to all existing and new customers, including any customers who may have pre-paid the Company for their fuel costs for the upcoming winter season;

- Providing customers with a variety of pricing options

- Honoring all protected price, service and installation commitments to its customers;

- Paying vendors for inventory, parts and services received during the reorganization process; and

- Providing employees with uninterrupted wages, healthcare coverage, vacation and sick leave.

To fund its continuing operations during the restructuring process, the Company has negotiated a commitment of up to US$115 million debtor-in-possession revolving credit facility ("DIP Facility") from a group of lenders led by Bank of America. The DIP facility, which will be used to meet the Company's working capital needs throughout the reorganization process, is subject to court approval and the potential objection by the Company's pre-petition lenders.

The Company's decision to file for bankruptcy protection was a result of several factors, including the record level of fuel oil prices and the impact of those prices on both the Company's on-going working capital requirements and operational performance.

Michael Anton, Chief Executive Officer of HOP stated "The Company has been engaged in a lengthy process to address its capital structure, particularly its increased working capital needs. Unfortunately, the combination of unprecedented fuel oil prices and diminished operational performance, specifically decreased gross margins, an increase in overall operating expenses and further customer attrition has made such a re-financing of the Company's capital structure impossible to achieve outside of the bankruptcy process."

M. Douglas Young, Chairman of the Board of Trustees of the Fund, stated, "On behalf of the entire Board of Trustees, I want to express our disappointment that we have been unable to achieve our desired levels of performance at the Fund and the Company in the current environment, and within the Company's existing operating constraints. We deeply regret the adverse effect today's action will have on the Fund's unitholders." Unitholders will be kept apprised of developments affecting the Fund and the Company as the restructuring process advances. The Fund cautioned that, given the level of financing provided by secured creditors of the Company, it is unlikely that unitholders will receive any consideration in respect of the Fund's investment upon completion of the restructuring process.

HOP has filed a series of first day motions in the Bankruptcy Court in Bridgeport, Connecticut to ensure that the Company will not have any interruption in maintaining and honoring all of its commitments to its customers. The motions also address the Company's continued ability to pay its vendors, the retention of various professional advisors and other matters. RSM Richter Inc. will be proposed as the Court-appointed Information Officer in Canada under the CCAA.

Company employees will be paid in the usual manner and their health and welfare benefits are expected to continue without disruption. The Company's 401(k) plan is maintained independently of the Company, is protected under federal law and will continue to be administered as usual.

The Fund indirectly owns approximately 88.1% of HOP, one of the largest residential heating oil distributors in the United States. HOP delivered over 236 million gallons of heating oil and other refined liquid petroleum products for the twelve months ended June 30, 2005 to approximately 137,000 residential, fleet and commercial customers, primarily in Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Pennsylvania, Rhode Island, Virginia and the District of Columbia. HOP's operations are conducted through 16 regional distribution and service centres. From these centres, HOP provides its customers with a full range of value-added services, including the delivery of heating oil and the installation, maintenance and service of furnaces, boilers, heating equipment and air conditioners on a 24 hours-a-day, 365 days-a-year basis.

This news release contains forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors outside of Management's control that could cause actual results to differ materially from those described in the forward-looking statements. The Fund does not assume responsibility for the accuracy and completeness of these forward-looking statements and does not undertake the obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Additional information, including the Fund's complete financial statements for the fiscal year ended September 30, 2004 and the quarter ended June 30, 2005, can be found at www.sedar.com or on the Fund's website at www.hif-un.com.

Contact Information

  • Heating Oil Partners, L.P.
    Carlos Rojas
    Chief Financial Officer
    (203) 655-8290