SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission
File Number 1-10091
HUNTWAY PARTNERS, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3601653
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
25129 The Old Road, Suite 322
Newhall, California
(Address of Principal Executive Offices)
91381
(Zip Code)
Registrant's Telephone Number Including Area Code: (805) 286-1582
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(b) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
QUARTERLY REPORT ON FORM 10-Q
HUNTWAY PARTNERS, L.P.
For the Quarter Ended June 30, 1996
INDEX
Part I. Financial Information
Page
Condensed Consolidated Balance Sheets as
of June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Operations for the Three and Six Months
Ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of
Partners' Capital (Deficiency) for the Six Months
Ended June 30, 1996 4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
June 30, 1996 and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9
Part II. Other Information 15
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,735 $ 4,304
Accounts Receivable 6,079 4,820
Inventories 6,150 3,320
Prepaid Expenses 929 676
Total Current Assets 15,893 13,120
PROPERTY - Net 59,279 58,677
OTHER ASSETS 1,078 780
GOODWILL 1,787 1,816
TOTAL ASSETS $ 78,037 $ 74,393
CURRENT LIABILITIES:
Accounts Payable $ 8,815 $ 6,582
Current Portion of Long-Term 94,345 94,445
Obligations
Reserve for Plant Closure 155 164
Accrued Interest 3,669 1,417
Other Accrued Liabilities 2,185 1,949
Total Current Liabilities 109,169 104,557
LONG-TERM OBLIGATIONS 350 350
PARTNERS' CAPITAL:
General Partners (315) (305)
Limited Partners (31,167) (30,209)
Total Partners' Capital (31,482) (30,514)
(Deficiency)
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 78,037 $ 74,393
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
Unaudited Unaudited Unaudited Unaudited
<S> <C> <C> <C> <C>
SALES $ 26,099 $ 21,061 $ 43,308 $ 33,339
COSTS AND EXPENSES:
Material and
Processing Costs 22,076 20,527 38,834 33,366
Selling and Administration
Expenses 924 915 1,790 1,924
Interest Expense 1,316 1,300 2,605 2,555
Depreciation and
Amortization 532 605 1,047 1,168
Total Costs and Expenses24,848 23,347 44,276 39,013
NET INCOME (LOSS) $ 1,251 $ (2,286) $ (968) $ (5,674)
NET INCOME (LOSS)
PER UNIT $ 0.11 $ (0.20) $ (0.08) $ (0.49)
LIMITED PARTNER EQUIVALENT
UNITS OUTSTANDING 11,673 11,673 11,673 11,673
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(DEFICIENCY)
(in thousands)
<CAPTION>
General Limited
Partners Partners Totals
<S> <C> <C> <C>
Balance at January 1, 1996 $ (305) $ (30,209) $ (30,514)
Net Loss for the Six Months
Ended June 30, 1996 (10) (958) (968)
Balance at June 30, 1996 $ (315) $ (31,167) $ (31,482)
</TABLE>
<TABLE>
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<CAPTION>
Six Six
Months Ended Months Ended
June 30, June 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (968) $ (5,674)
Adjustments to Reconcile Net Loss
to Net Cash Provided by Operating Activities:
Interest Expense Paid by the Issuance of Notes 0 1,692
Depreciation and Amortization 1,047 1,168
Changes in Operating Assets and Liabilities:
Increase in Accounts Receivable (1,259) (2,558)
Increase in Inventories (2,783) (1,037)
Increase in Prepaid Expenses (253) (48)
Decrease in Reserves for Plant Closure (9) (28)
Increase in Accounts Payable 2,233 3,418
Increase in Accrued Liabilities 2,488 190
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 496 (2,877)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property (1,570) (150)
Additions to Other Assets (395) (147)
NET CASH USED BY INVESTING ACTIVITIES (1,965) (297)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Long-term Obligations (100) (242)
NET CASH USED BY FINANCING ACTIVITIES (100) (242)
NET DECREASE IN CASH (1,569) (3,416)
CASH BALANCE - BEGINNING OF PERIOD 4,304 5,984
CASH BALANCE - END OF PERIOD $ 2,735 $ 2,568
INTEREST PAID IN CASH DURING THE PERIOD $ 353 $ 887
</TABLE>
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements
of Huntway Partners, L.P. and subsidiary as of June 30, 1996 and
for the three and six month periods ended June 30, 1996 and 1995
are unaudited, but in the opinion of management, reflect all
adjustments necessary for a fair presentation of such financial
statements in accordance with generally accepted accounting
principles. The results of operations for an interim period are
not necessarily indicative of results for a full year. The
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto contained in the Partnership's annual report for the year
ended December 31, 1995.
Crude oil and finished product inventories are stated at
cost determined by the last-in, first-out method, which is not in
excess of market. For the first half of 1996 and 1995, the
effect of LIFO was to increase the net loss by $490,000 and
$618,000, respectively. For the second quarter of 1996 and 1995,
the effect of LIFO was to increase net income by $161,000 and to
increase the net loss by $304,000, respectively.
Inventories at June 30, 1996 and December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Finished Products $4,379,000 $2,295,000
Crude Oil and Supplies 3,431,000 2,195,000
7,810,000 4,490,000
Less LIFO Reserve (1,660,000) (1,170,000)
Total $6,150,000 $3,320,000
</TABLE>
2. FINANCIAL ARRANGEMENTS
On December 4, 1995, the Partnership announced that it did
not make its scheduled $1,000,000 debt payment due November 30,
1995 and was, therefore, in default under its indenture. At that
time, the Partnership was verbally informed by substantially all
of its senior lenders that they did not intend to pursue their
remedies under the current indenture due to nonpayment while
discussions regarding the potential restructuring of the
Partnership's indebtedness was continuing. The Partnership also
stated that it would not be making any further payments under the
current indenture which provided for payment of $5,000,000 in
1996 paid quarterly under a defined formula. As a result, at
December 31, 1995 and June 30, 1996, substantially all of the
Partnership's outstanding indebtedness was classified as current.
On April 15, 1996, the Partnership announced that it had
reached agreement with four of its five senior lenders,
representing 86% of its senior debt, to restructure its
indebtedness over a ten-year period.
The agreement specifies, among other things, that total debt
will be reduced from $95,500,000 to $25,600,000 effective January
1, 1996. The new debt will carry an interest rate of 12%.
Had this restructuring agreement been in effect during the
three and six month periods ended June 30, 1996, interest expense
would have been reduced by $470,000 and $924,000, respectively.
Net income for the second quarter of 1996 would have been
$1,721,000 and the net loss for the first half of 1996 would have
been $44,000. Current liabilities, as of June 30, 1996, would
have been $11,864,000, long-term obligations would have been
$25,950,000 and Partners' equity would have been $38,458,000.
The agreement also specifies that no cash interest will be
paid in 1996 unless cash at December 31, 1996 exceeds $6,000,000.
Cash in excess of $6,000,000 at December 31, 1996, net of funding
capital expenditures (not to exceed $4,150,000), will be paid to
the lenders on January 15, 1997. Such payment will replace,
dollar for dollar, required debt amortization in year three of
the agreement. In 1997, the Partnership is obligated to pay cash
interest and debt amortization based on 50% of excess cash flow
as defined.
Although a majority of the Partnership's senior lenders and
all of the Partnership's junior lenders have agreed to enter into
an out-of-court consensual restructuring on the terms set forth
above, consummation of the Consensual Restructuring Agreement
requires that all of the Partnership's senior lenders affected
thereby agree to its terms and the Partnership has been unable to
obtain the consent of one of the Partnership's senior lenders
(representing 14% of its outstanding senior indebtedness) to the
Consensual Restructuring Agreement. Accordingly, the Partnership
has determined that reorganization under the federal bankruptcy
laws pursuant to a Prepackaged Plan is the only available
alternative to achieve the beneficial effects of the
Restructuring Agreement.
On July 24, 1996, the Partnership announced that it had
filed a Consent Solicitation Disclosure Statement and related
consent materials with the Securities and Exchange Commission and
will be seeking Unitholder approval of the restructuring on such
terms. The partnership anticipates that it will distribute
definitive consent solicitation materials to common unitholders
promptly following the applicable SEC review period. Any such
prepackaged plan will provide for the continuing and timely
payment in full of all of the partnership's obligations to
suppliers, other trade creditors and employees under normal trade
terms.
At June 30, 1996, the cash position of the Partnership was
$2,735,000. In the opinion of management, assuming completion of
the debt restructuring (which provides for no principal and
interest payments on indebtedness during 1996), cash on hand,
together with anticipated future cash flows, will be sufficient
to meet Huntway's liquidity obligations for the next 12 to 24
months.
3. CONTINGENCIES
On May 19, 1995, during testing pursuant to the closure of a
waste water treatment pond, the Partnership discovered that
several drums of hazardous materials had been improperly disposed
of at the site of the Wilmington refinery. Subsequent
geophysical testing to date indicated that approximately 20 to 30
of such drums had been improperly disposed of at the site. The
materials had been stored in drums and disposed of under the
waste water treatment pond apparently at the time of its
construction. The Partnership has expended approximately
$120,000 for evaluation and remediation of the contamination. Of
this amount, approximately $75,000 has been recovered from the
former owners and operators of the site, as well as the entities
involved in the construction of the pond. Management does not
believe, based upon the information known at this time, that any
additional costs will be incurred.
The Partnership is party to a number of lawsuits and other
proceedings arising out of the ordinary course of its business.
While the results of such lawsuits and proceedings cannot be
predicted with certainty, management does not expect that the
ultimate liability, if any, will have a material adverse effect
on the consolidated financial position or results of operations
of the Partnership.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with
the financial statements included elsewhere in this report.
Results of Operations
Huntway is principally engaged in the processing and sale of
liquid asphalt products, as well as the production of other
refined petroleum products such as gas oil, naphtha, kerosene
distillate, diesel fuel, jet fuel and bunker fuel.
Huntway's ability to generate income depends principally
upon the margins between the prices for its refined petroleum
products and the cost of crude oil, as well as upon demand for
liquid asphalt, which affects both price and sales volume.
Historically, refined petroleum product prices (including
prices for liquid asphalt, although to a lesser degree than
Huntway's other refined petroleum products) generally fluctuate
with crude oil price levels. Accordingly, there has not been a
relationship between total revenues and income due to the
volatile commodity character of crude oil prices.
Accordingly, income before interest, depreciation and
amortization provides the most meaningful basis for comparing
historical results of operations discussed below.
A number of uncertainties exist that may affect Huntway's
future operations including the possibility of further increases
in crude costs that may not be able to be passed on to customers
in the form of higher prices. Additionally, crude costs could
rise to such an extent that Huntway may not have sufficient
letter of credit availability to purchase all the crude it needs
to sustain operations to capacity, especially during the summer
season. If this occurred, Huntway would be forced to reduce
crude purchases which could adversely impact results of
operations. The Partnership's primary product is liquid asphalt.
Most of Huntway's competitors produce liquid asphalt as a by-
product and are of much greater size and have much larger
financial resources than the Partnership. Accordingly, the
Partnership has in the past, and may have in the future,
difficulty raising prices in the face of increasing crude costs.
Three Months Ended June 30, 1996 Compared with the Three Months
Ended June 30, 1995
Second quarter 1996 net income was $1,251,000, or $.11 per
unit, versus a 1995 second quarter net loss of $2,286,000, or
$.20 cents per unit.
The improvement in results between quarters of $3,537,000 is
principally attributable to significantly higher light-product
margins as well as significantly reduced rainfall in the second
quarter of 1996 versus the second quarter of 1995. Prices for
Huntway's light-end products rose in the second quarter
commensurate with the dramatic rise in wholesale gasoline and
diesel prices in California. This increase was the result of
production disruptions and inventory shortages of California
Phase II fuels. All of the first half of 1995 was characterized
by unseasonably high rainfall which severely curtailed paving
asphalt sales and forced the sale of significant amounts of low-
margin fuel oil in order to maintain cash flow. No fuel oil sales
occurred in the current quarter as compared to 60,000 barrels in
the comparable quarter of 1995. Sales of paving and other
asphalts decreased by 7,000 barrels, or 1%, to 576,000 barrels in
the second quarter of 1996 from 583,000 barrels in the second
quarter of 1995. This nominal decline is the result of project
timing in Northern California and a temporary loss of market share in
Southern California as certain competitors have declined to raise
asphalt prices commensurate with the rise in crude costs.
Overall, sales of asphalt-based products decreased
between quarters by 67,000 barrels, or 10%.
The following table sets forth the effects of changes in
price and volume on sales and material and processing costs on
the quarter ended June 30, 1996 as compared to the quarter ended
June 30, 1995:
<TABLE>
<CAPTION>
Material & Barrels
Sales Processing Net Sold
(In Thousands)
<S> <C> <C> <C> <C>
Quarter ended June 30, 1995 $ 21,061 $ 20,527 $ 534 1,137
Effect of changes in price 4,668 1,188 3,480
Effect of changes in volume 370 361 9 20
Quarter ended June 30, 1996 $ 26,099 $ 22,076 $ 4,023 1,157
</TABLE>
As reflected in the table, the net margin between sales and
material and processing costs improved from $.47 per barrel for
the second quarter of 1995 to $3.48 per barrel for the second
quarter of 1996. This improvement in net margin of $3,489,000 is
primarily attributable to the Partnership's significantly
improved margin on light products in the second quarter as
wholesale gasoline and diesel prices rose dramatically due to
shortages of California Phase II fuels. Asphalt margins also
improved due to improved weather conditions in the second quarter
of 1996 as compared to the second quarter of 1995 as discussed
above. Overall, sales prices averaged $22.56 per barrel for the
second quarter of 1996 as compared to $18.52 per barrel for the
comparable quarter of 1995, an increase of $4.04, or 22%. This
increase in pricing was partially offset by increased material
and processing costs which averaged $19.08 and $18.05 for the
quarters ended June 30, 1996 and 1995, respectively, an increase
of $1.03, or 6%.
Selling, general and administrative costs were comparable to
the second quarter of 1995 increasing by $9,000.
Depreciation and amortization fell to $532,000 in the second
quarter of 1996 from $605,000 in the comparable quarter of 1995
reflecting reduced depreciation of the Sunbelt refinery
subsequent to its write down in 1995. Interest expense was
generally consistent with the prior year. Interest expense in
the second quarter does not reflect the impact of the reduced
debt level contemplated in the proposed financial restructuring
described in Note 2, "Financial Arrangements". Had the
restructuring been completed at the beginning of 1996, second
quarter interest expense would have been $846,000 versus
$1,316,000 incurred in the first quarter of 1996, a difference of
$470,000, or $.04 per unit.
Because of the foregoing, as well as other factors affecting
the Partnership's operating results, past financial performance
should not be considered to be a reliable indicator of future
performance and investors should not use historical trends to
anticipate results or trends in future periods.
Six Months Ended June 30, 1996 Compared with the Six Months Ended
June 30, 1995
The 1996 first half net loss was $968,000, or $.08 per unit,
versus a 1995 first half net loss of $5,674,000, or $.49 per
unit.
The improvement in results between periods of $4,706,000 is
principally attributable to improved light-end prices and better
asphalt margins resulting from lower levels of rainfall in the
first half of 1996 versus the first half of 1995. The first half
of 1995 was characterized by unseasonably high rainfall which
severely curtailed paving asphalt sales and forced the sale of
significant amounts of low-margin fuel oil in order to maintain
cash flow. Accordingly, sales of paving and other asphalts
increased by 146,000 barrels, or 18%, to 955,000 barrels in the
first half of 1996 from 809,000 barrels in the first half of
1995. Fuel oil sales fell in the current period by 209,000
barrels to 58,000 barrels from 267,000 barrels in the comparable
period of 1995. Overall, sales of asphalt-based products
decreased by 63,000 barrels, or 6%. Additionally, as previously
discussed, light product margins in the first half of 1996
were substantially improved over the first half of 1995.
The following table sets forth the effects of changes in
price and volume on sales and material and processing costs on
the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995:
<TABLE>
Material & Barrels
Sales Processing Net Sold
(In Thousands)
<S> <C> <C> <C> <C>
Six months ended June 30, 1995 $ 33,339 $ 33,366 $ (27) 1,887
Effect of changes in price 7,195 2,692 4,503
Effect of changes in volume 2,774 2,776 (2) 157
Six months ended June 30, 1996 $ 43,308 $ 38,834 $ 4,474 2,044
</TABLE>
As reflected in the table, the net margin between sales and
material and processing costs improved from a negative $.01 per
barrel for the first half of 1995 to $2.19 per barrel for the
first half of 1996. This improvement in net margin of $4,501,000
is primarily attributable to improved light-end gross profit and
improved asphalt gross profit due to improved weather conditions in the
first half of 1996 as compared to the first half of 1995 as
discussed above. Sales prices averaged $21.19 per barrel for the
first half of 1996 as compared to $17.67 per barrel for the
comparable quarter of 1995, an increase of $3.52, or 20%. This
increase in pricing was partially offset by increased material
and processing costs which averaged $19.00 and $17.68 for the six
months ended June 30, 1996 and 1995, respectively, an increase of
$1.32, or 7%.
Selling, general and administrative costs decreased $134,000
compared to the first half of 1995 primarily as a result of the
recovery of a previously written-off accounts receivable.
Depreciation and amortization fell to $1,047,000 in the
first half of 1996 versus $1,168,000 in the comparable period of
1995 primarily as a result of reduced depreciation of the Sunbelt
refinery subsequent to its write down in 1995. Interest expense
was generally consistent with the prior year. Interest expense
in the first half does not reflect the impact of the reduced debt
level contemplated in the proposed financial restructuring
described in Note 2, "Financial Arrangements". Had the
restructuring been completed at the beginning of 1996, first half
interest expense would have been $1,681,000 versus $2,605,000
incurred in the first half of 1996, a difference of $924,000, or
$.08 per unit.
Because of the foregoing, as well as other factors affecting
the Partnership's operating results, past financial performance
should not be considered to be a reliable indicator of future
performance and investors should not use historical trends to
anticipate results or trends in future periods.
Capital Resources And Liquidity
The primary factors that affect the Partnership's cash
requirements and liquidity position are fluctuations in the
selling prices of refined products caused by local market supply
and demand factors, including public and private demand for road
construction and improvement as well as demand for diesel fuel
and gasoline, as well as fluctuations in the cost of crude oil
which is impacted by a myriad of market factors, both foreign and
domestic. In addition, capital expenditure requirements,
including costs to maintain compliance with environmental
regulations as well as debt service requirements, also impact the
Partnership's cash needs.
In the first six months of 1996, operating activities
provided $496,000 in cash. The period's net loss of $968,000 was
offset by non-cash items of $1,047,000. Seasonal increases in
accounts receivable and inventory of $4,042,000 were financed by
a similar seasonal increase in accounts payable of $2,233,000.
Prepaid expenses increased by $253,000 primarily due to
turnaround costs. Accrued interest increased by $2,252,000 as
interest continues to accrue under the existing debt agreement
until the proposed debt restructuring is completed as described
below. In comparison, during the first half of 1995, operating
activities consumed $2,877,000 in cash primarily resulting from
the period's net loss of $5,674,000 offset by non-cash items of
$2,860,000. Seasonal increases in accounts receivable and
inventories of $3,595,000 were financed by similar seasonal
increases in accounts payable and accrued liabilities which
increased by $3,608,000.
Investing activities consumed $1,965,000 during the first
six months of 1996 primarily for refinery equipment including new
polymer facilities and tankage for our Benicia refinery. During
the first half of 1995, investing activities consumed $297,000
primarily for refinery equipment and deposits.
Financing activities consumed $100,000 in the first six
months of 1996 pursuant to a 1993 settlement with the State of
Arizona. In the first half of 1995, financing activities
consumed $242,000 primarily for reduction in the capital lease
obligation.
As described below, the Partnership has reached an agreement
in principle with four of its five senior lenders, representing
86% of its senior debt, to restructure its indebtedness over a
ten-year period. The Partnership has also reached agreement with
the holders of its junior subordinated debt on the restructuring
plan described below.
On April 15, 1996, the Partnership announced that it had
reached an agreement in principle to restructure its indebtedness
with its current lenders. The agreement, which is subject to
final documentation and unitholder approval, will reduce total
indebtedness from $95,500,000 at December 31, 1995 to $25,600,000
effective January 1, 1996. Under the agreement, the new debt
will carry an interest rate of 12%. The new debt will mature ten
years from date of closing, or December 31, 2005, and will
amortize ratably over years three through ten of the agreement.
No cash interest will be paid in 1996 unless cash at December 31,
1996 exceeds $6,000,000. Cash in excess of $6,000,000 at
December 31, 1996 net of funding capital expenditures (not to
exceed $4,150,000) will be paid to the lenders on January 15,
1997. Such payment will replace, dollar for dollar, required
debt amortization in year three of the agreement. In 1997, the
Partnership is obligated to pay cash interest and debt
amortization based on 50% of excess cash flow as defined.
The Partnership will issue approximately 13.8 million new
units to its lenders, including approximately 1.1 million to its
junior noteholders as part of this transaction. The Partnership
currently has approximately 11.6 million units outstanding.
Additionally, the Partnership will retire approximately 3.9
million warrants previously distributed to its lenders. After
the transaction, new warrants to acquire approximately 1.1
million units will be outstanding with an exercise price of $.50
a unit. The agreement also specifies that management will be
issued options to acquire units representing 10% of the fully-
diluted equity of the Partnership (inclusive of options already
issued) at an exercise price of $.50 per unit.
Although a majority of the Partnership's senior lenders and
all of the Partnership's junior lenders have agreed to enter into
an out-of-court consensual restructuring on the terms set forth
above, consummation of the Consensual Restructuring Agreement
requires that all of the Partnership's senior lenders affected
thereby agree to its terms and the Partnership has been unable to
obtain the consent of one of the Partnership's senior lenders
(representing 14% of its outstanding senior indebtedness) to the
Consensual Restructuring Agreement. Accordingly, the Partnership
has determined that reorganization under the federal bankruptcy
laws pursuant to a Prepackaged Plan is the only available
alternative to achieve the beneficial effects of the
Restructuring Agreement and permit the Company to continue to
operate as a going concern and to preserve the Unitholders'
investment in the Partnership.
On July 24, 1996, the Partnership announced that it had
filed a Consent Solicitation Disclosure Statement and related
consent materials with the Securities and Exchange Commission and
will be seeking Unitholder approval of the restructuring on such
terms. The partnership anticipates that it will distribute
definitive consent solicitation materials to common unitholders
promptly following the applicable SEC review period. Any such
prepackaged plan will provide for the continuing and timely
payment in full of all of the partnership's obligations to
suppliers, other trade creditors and employees under normal trade
terms.
Under applicable bankruptcy law, a plan of reorganization
must be approved by the affirmative vote of 2/3 in dollar amount
and 1/2 in number of each class of security holder which is
impaired under the plan. Senior debt holders, junior
subordinated debt holders, equity interests of holders of common
units, equity interests of warrant holders, equity interests of
holders of existing unit options and general partner interests
will be impaired under the prepackaged plan. As described above,
senior lenders, representing 86% in dollar and 80% in number,
have said they would vote for the plan. Management of the
Partnership believes that the terms of the prepackaged plan are
favorable to the Partnership's existing common units and expects
that common unit holders will also approve the prepackaged plan.
The Partnership's current debt agreement provides for a
$17,500,000 letter of credit facility (LC). The facility
provides for crude purchases, hedging and other activities. Fees
for this facility are 2% on the face amount of any letter of
credit issued up to an aggregate of $14,500,000 and 3% on the
face amount of any letter of credit issued above that amount.
Under the terms of the proposed future restructuring agreement, a
new letter of credit facility will be made available to the
Partnership (under similar terms as the existing facility) for
one year following the closing of the current proposed
restructuring.
The Partnership believes its current level of letter of
credit facilities are sufficient to guarantee requirements for
crude oil purchases, collateralization of other obligations and
for hedging activities at current crude price levels. However,
due to the volatility in the price of crude oil, there can be no
assurance that these facilities are adequate. If crude oil
prices were to increase, the Partnership may be required to
reduce its crude oil purchases which would adversely impact
profitability.
At June 30, 1996, the cash position of the Partnership was
$2,735,000. In the opinion of management, assuming completion of
the debt restructuring (which provides for no principal and
interest payments on indebtedness during 1996), cash on hand,
together with anticipated future cash flows, will be sufficient
to meet Huntway's liquidity obligations for the next 12 to 24
months.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is party to a number of additional lawsuits
and other proceedings arising out of the ordinary course of its
business. While the results of such lawsuits and proceedings
cannot be predicted with certainty, management does not expect
that the ultimate liability, if any, will have a material adverse
effect on the consolidated financial position or results of
operations of the Partnership other than as previously reported.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
The Partnership is in default of certain of its
indebtedness. See Note 2 to the financial statements included in
this report.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
August 12, 1996.
HUNTWAY PARTNERS, L.P.
(Registrant)
By: /S/ Warren J. Nelson
Warren J. Nelson
Executive Vice President
and Chief Financial Officer
(Principal Accounting Officer)
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