Getty Petroleum, Bionol Head To Court Over $230M Award

March 14, 2012 | By Peg Brickley | Daily Bankruptcy Review-News

Getty Petroleumn Marketing Inc. is gearing up to defeat a $230 million arbitration award in favor of its former ethanol supplier, Bionol Clearfield LLC.

With both companies in bankruptcy, the outcome of the dispute will determine whether Getty's creditors, or Bionol's, get paid.

Judge Shelley C. Chapman of the U.S. Bankruptcy Court in Manhattan will hear arguments on the arbitration award dispute April 2. That's also the date set for Getty Petroleumn to attempt to persuade Chapman to sign off on a settlement with landlord Getty Realty Corp.

The settlement gives Getty Petroleum until April 30 to pay $8.7 million in rent to Getty Realty. If it can't pay, Getty Petroleumn, which subleases the land to 800 gas stations, will be evicted, ending hopes it can reorganize and emerge from bankruptcy, court papers say.

Bionol Clearfield is already in liquidation mode, working to sell its plant and trying to collect its arbitration award from Getty Petroleum. The award stems from a contract fight that has loomed large since before Getty Petroleum filed for bankruptcy protection in December 2011.

A fledgling company in the alternative fuel industry, Bionol says Getty Petroleum pushed it into bankruptcy by breaching a contract. Getty Petroleum denies the allegations, and says arbitrators got it "shockingly" wrong when they ruled for Bionol.

Bionol attempted to force Getty Petroleum to pay up in Bionol's Chapter 7 case, which is going on in the U.S. Bankruptcy Court in Wilmington, Del.

That effort was thwarted, and Bionol's now trying to collect its arbitration award in Getty Petroleum's Chapter 11 proceeding, which was filed in New York

Papers filed this week by Getty Petroleum say arbitrators disregarded fundamental legal principles in handing victory to Bionol. Bionol's reply papers accused Getty Petroleum of a "gambit" to delay the inevitable day of judgment.

The Pennsylvania ethanol producer claims Getty Petroleum reneged on a supply contract that was the foundation for financing that meant a new plant and jobs for 300 people in an economically depressed region.

The plant is up for sale, the jobs are gone, and Bionol's creditors are waiting to be paid in the company's Chapter 7 case. Bionol's creditors account for a large portion of the more than $300 million worth of bills that Getty Petroleum estimates it faces.

The settlement with Getty Realty spells out what happens if Bionol Clearfield wins the arbitration fight: Alfred Giuliano, the Chapter 7 trustee for Bionol CLearfield, will be one of two trustees overseeing the final days of Getty Petroleum, court papers say.

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