VALLEY FORGE, Pa. -- UGI Corp. announced Tuesday its AmeriGas subsidiary expects to complete the acquisition of a major stake in the bankrupt Petrolane Gas Service by August.
UGI chairman James Sutton told shareholders at the holding company's annual meeting that Petrolane's creditors have overwhelmingly accepted a pre-packaged plan to reorganize the propane gas company.
Under the plan, about $1 billion of Petrolane's debt will be restructured and Petrolane's bondholders and AmeriGas will become the company's owners.
Sutton said Petrolane and its related companies will now file for reorganization in federal Bankruptcy Court in New York.
Pending court and regulatory approval, AmeriGas will pay up to $51 million to acquire 30 percent of the company over a six-month period. Petrolane will contribute $19 million of that total from a new line of credit.
Sutton said the AmeriGas contribution will come mostly from an offering of additional UGI common shares in the fall. He said AmeriGas can acquire the remaining 70 percent of Petrolane within five years for 26 percent of the stock of AmeriGas.
In addition to its equity interests, UGI will receive an annual management fee of $11.6 million from Petrolane. AmeriGas will be reimbursed for its expenses to operate the business.
'A revitalized Petrolane operating under AmeriGas cost-efficient programs and systems can provide significant growth in cash flow and earnings,' Sutton said.
According to Sutton, the combined AmeriGas and Petrolane entities will comprise the largest propane marketing company in the U.S.