Loan Irregularities Triggered Prax Lindsey Refinery Collapse
- The rapid collapse of the State Oil refinery, operated by the Prax Group, was triggered by the discovery of "material irregularities" and a subsequent £783m loan facility being...
- The irregularities, identified just a week before administrators were appointed, prompted directors, including chief executive Sanjeev soosaipillai, to halt the loan.
- The termination of the loan facility prevented State Oil from repaying its primary supplier, commodities trading giant Glencore.
State Oil Refinery Collapse: Irregularities, Debt, and a Disappearing Owner
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The rapid collapse of the State Oil refinery, operated by the Prax Group, was triggered by the discovery of “material irregularities” and a subsequent £783m loan facility being terminated, according to filings by administrators Teneo.
The irregularities, identified just a week before administrators were appointed, prompted directors, including chief executive Sanjeev soosaipillai, to halt the loan. This action then called into question guarantees provided by State Oil for other group debt financing, revealing over £1.5bn in outstanding inter-company loans.
Glencore Seizes Control, Production Halts
The termination of the loan facility prevented State Oil from repaying its primary supplier, commodities trading giant Glencore. Under the terms of their supply agreement, Glencore promptly seized control of crude oil and refined products, effectively halting sales to customers like petrol stations and airports without their approval.
Teneo attributes this seizure as a key factor in the “accelerated nature” of the company’s downfall, which caught government ministers off guard. Ministers had received assurances from Soosaipillai just weeks prior regarding the company’s financial health.
Financial Fallout and Creditor Claims
The administrators are uncertain about the total amount recoverable for creditors and the extent of their claims. Discrepancies exist between Companies House records showing outstanding loans to Prax companies and the companies’ own records,which indicate no debt.
significant creditors include:
- Shell: £10m+
- HMRC: £70m
- Deloitte (Project King): £700,000+
Additionally, 171 State Oil employees are collectively owed £4.2m, with 45 already made redundant.
Asset Sales and Legal Action
teneo is attempting to sell Prax Group assets,including a North Sea oilfield,three tankers,and hundreds of petrol stations. state Oil’s shareholdings in subsidiaries are valued at £112.2m.
Administrators have filed a legal claim against Soosaipillai for breach of fiduciary duty and will report his conduct to the government’s insolvency service.
Prior to the collapse, Soosaipillai and his wife, Arani, extracted £11.5m from the business thru pay and dividends after acquiring the refinery from Total.
Government Response and Soosaipillai’s Whereabouts
Energy Minister Michael Shanks has urged the couple to provide support to the affected workers. However, government officials have struggled to contact Soosaipillai, who is believed to have left the country.
The Prax Group, built from a single petrol station over three decades, expanded rapidly through debt-fueled acquisitions. The refinery, based in Weybridge, surrey, has now ceased production, but the Official Receiver is seeking a potential buyer.