NEW YORK (Reuters) – Philadelphia Energy Solutions will defer retirement payments to union members until next year, the company said in a letter to the union last week, the latest sign the refiner is struggling to find its financial footing after emerging from bankruptcy less than a year ago.
The Philadelphia Energy Solutions oil refinery owned by The Carlyle Group is seen at sunset in Philadelphia March 26, 2014. Picture taken March 26, 2014. REUTERS/David M. Parrott/File Photo
The company informed union members late last week that it was deferring company matched bi-weekly payments into their retirement accounts and will instead make a lump-sum payment on April 1, 2020, according to the letter, a copy of which was obtained by Reuters.
The company did not provide an explanation for the switch, but the move will allow it to save cash in the short term but comes with the risk of building up a sizable liability. If the company were to file for bankruptcy, for example, the union would join other creditors in seeking payments.
A company spokeswoman did not immediately respond to requests for comment.
The move angered the union, which recently set up a picket line at the refinery’s front gates.
“We will not work in an oil refinery without a real retirement plan. It won’t happen,” Ryan O’Callaghan, president of the United Steelworkers Union Local 10-1, said in a phone interview on Friday.
The union’s contract expires in September but the company has asked to start negotiations early and for concessions.
The refiner also recently let go about 25 percent of its contract employees, two sources familiar with the plant’s operations told Reuters on Friday.
PES, which emerged from bankruptcy in August, saw its cash balance fall to $87.7 million at the end of 2018 from $148 million just three months earlier, according to a post-bankruptcy financial report filed in January.
The company finished the first quarter with $87.8 million in cash, the latest financial records show. PES still has more $700 million in long-term debt, most of which comes due in 2022.
U.S. East Coast refiners like PES lack access to cheaper crude that refiners in other parts of the country enjoy, which inflicts greater pain on the region’s industry when margins are low.
Several plants have closed in the past two decades, and PES faced closure in 2012 before being rescued by the Carlyle Group.