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Court Upholds Bionol Clearfield's Win Over Getty Petroleumn

April 23, 2012 | By Peg Brickley | Daily Bankruptcy Review-News

A judge in New York confirmed Bionol Clearfield LLC's $230 million win over Getty Petroleum Marketing in a contest over who was at fault for a failed deal that ultimately sent both companies into bankruptcy.

Judge Shelley Chapman read her decision at a hearing Thursday in the U.S. Bankruptcy Court in Manhattan, according to Loring Fenton of Greenberg Traurig, attorney for Getty Petroleum.

The ruling is a big win for creditors of the small Pennsylvania company that on Friday won approval to sell its $270 million ethanol plant for $9.35 million.

TD Bank and others that backed Bionol Clearfield's pioneering effort in alternative fuels were counting on money from the arbitration to recoup some of what they lost on the plant.

The first of its kind to be built in Pennsylvania, the Bionol Clearfield plant was idled after Getty Petroleum pulled out of an agreement to buy the gasoline additive produced there. The company filed for bankruptcy protection in Delaware.

Getty Petroleum said it had a right to walk away from the ethanol supply deal once the arrangement became a money-losing proposition. Bionol Clearfield said Getty Petroleum breached an agreement was the basis for the hundreds of millions of dollars of financing for the plant.

Bionol Clearfield's creditors have been chasing the money from the arbitration award for months, continuing the pursuit after Getty Petroleum filed for Chapter 11 bankruptcy. Chapman's decision to affirm the arbitration award puts Bionol Clearfield bankruptcy trustee Alfred Giuliano in a key position in the Getty Petroleum bankruptcy.

Under an agreement with Getty Realty Corp. (GTY), Giuliano will be one of two officials that will decide what happens next in the case of Getty Petroleum.

Landlord Getty Realty will be reclaiming some 800 gas stations at the end of the month unless Getty Petroleum finds a way to pay millions in back rent. That's highly unlikely, according to court filings.

Once Getty Petroleum is out of the gas-station business, action in the New York court will likely turn to a focus on litigation, as the best hope of finding cash to cover the arbitration award and other bills.

A lawsuit has been filed against an affiliate of Russia's Lukoil Holdings (LUKOY), which sold Getty Petroleum last year to an entity known as Cambridge Securities. The suit seeks damages for alleged defects in the deal on behalf of Getty Petroleum's creditors.

Ethanol suppliers hit hard times in recent years, squeezed by declining demand for their product and rising prices for raw materials, mainly the corn that they transformed into a gasoline additive. Bionol Clearfield was one of many to idle pricey new plants after only a few years of operation.

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