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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 13, 1997
TRANSAMERICAN REFINING CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)
TEXAS
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(State or other jurisdiction of incorporation)
33-85930 76-0229632
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(Commission File Number) (I.R.S. Employer
Identification No.)
1300 North Sam Houston Parkway East, Suite 320
Houston, Texas 77032
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(Address of principal executive offices, including zip code)
(281) 986-8811
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(Registrant's telephone number, including area code)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
TEC NOTES OFFERING. On June 13, 1997, TransAmerican Energy
Corporation ("TEC"), completed a private offering (the "TEC
Notes Offering") of $475 million aggregate principal amount
of 11 1/2% Senior Secured Notes due 2002 (the "TEC Senior
Secured Notes") and $1.13 billion aggregate principal amount
of 13% Senior Secured Discount Notes due 2002 (the "TEC
Senior Secured Discount Notes" and, together with the TEC
Senior Secured Notes, the "TEC Notes") for net proceeds of
approximately $1.3 billion. The TEC Notes are senior
obligations of TEC, secured by a lien on substantially all
of its existing and future assets, including the
intercompany loans described below.
INTERCOMPANY LOANS TO TRANSTEXAS AND TARC. With the proceeds
of the TEC Notes Offering, TEC made intercompany loans to
TransTexas Gas Corporation ("TransTexas") in the principal
amount of $450 million (the "TransTexas Intercompany Loan")
and to TransAmerican Refining Corporation ("TARC") in the
original amount of $676 million (the "TARC Intercompany
Loan"). The promissory note evidencing the TransTexas
Intercompany Loan (i) bears interest at a rate of 10 7/8% per
annum, payable semi-annually in cash in arrears and (ii) is
secured initially by a security interest in substantially
all of the assets of TransTexas other than inventory,
receivables and equipment. The promissory note evidencing
the TARC Intercompany Loan (i) accretes principal at a rate
of 16% per annum, compounded semi-annually until June 15,
1999 to a final accreted value of $920 million, and
thereafter pays interest semi-annually in cash in arrears on
the accreted value thereof, at a rate of 16% per annum and
(ii) is secured initially by a security interest in
substantially all of TARC's assets including the
Disbursement Account (described below) but excluding
inventory, receivables and equipment. The Intercompany Loan
agreements contain certain restrictive covenants, including
among others, limitations on incurring additional debt,
asset sales, dividends and transactions with affiliates.
Each Intercompany Loan will mature on June 1, 2002.
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TARC used approximately $103 million of the proceeds of the
TARC Intercompany Loan to repay certain indebtedness,
including senior secured notes of TARC that were issued in
March 1997 and debt owed to an affiliate, and to complete
the TARC Notes Tender Offer described below. Remaining
proceeds will be used for the Capital Improvement Program
described below and for general corporate purposes.
Upon the occurrence of a Change of Control (as defined in
the indenture governing the TEC Notes (the "TEC Notes
Indenture")), TEC will be required to make an offer to
purchase all of the outstanding TEC Notes at a price equal
to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, or, in the case of any
such offer to purchase TEC Senior Secured Discount Notes
prior to June 15, 1999, at a price equal to 101% of the
accreted value thereof, in each case, to and including the
date of purchase. Pursuant to the terms of the Intercompany
Loans, TEC may require TARC and TransTexas to pay a pro rata
share of the purchase price paid by TEC.
TARC WARRANTS TENDER OFFER. On June 13, 1997, TEC completed
a tender offer for the outstanding common stock purchase
warrants of TARC ("TARC Warrants") at a price of $4.50 per
warrant. Pursuant to the tender offer, TEC purchased
7,335,452 TARC Warrants for an aggregate purchase price of
approximately $33 million. TARC intends to enter into a
merger with one of its affiliates pursuant to which each
remaining warrant would become exercisable (at an exercise
price of $.01) to receive $4.51 of cash instead of one share
of common stock of TARC.
TARC EQUITY CONTRIBUTION. TEC intends to make a capital
contribution to TARC in the aggregate amount of $226 million
from the proceeds of the TransTexas stock repurchase program
(discussed below). The amount of this capital contribution
will be retained initially in the Disbursement Account and
contributed to TARC pursuant to the terms of the
Disbursement Agreement.
TARC NOTES TENDER OFFER. On June 13, 1997, TARC completed a
tender offer ("TARC Notes Tender Offer") for the (i) TARC
Mortgage Notes for 112% of their principal amount (plus
accrued and unpaid interest) and (ii) TARC Discount Notes
for 112% of their accreted value. In connection with the
TARC Notes Tender Offer, TARC has obtained consents from
holders of the TARC Notes to certain waivers under, and
amendments to the indenture governing the TARC Notes (the
"TARC Notes Indenture"), which eliminate or modify certain
of the covenants and other provisions contained in the TARC
Notes Indenture. Approximately $423 million aggregate
principal amount of TARC Mortgage Notes and TARC Discount
Notes were tendered and accepted by TARC at a cost to TARC
of approximately $437 million (including accrued interest
and premiums).
TRANSTEXAS STOCK REPURCHASE PROGRAM. TransTexas has
implemented a stock repurchase program pursuant to which it
plans to repurchase common stock from its public
stockholders and from its affiliates, including TEC and
TARC. It is anticipated that TransTexas will acquire four
times the number of shares from its
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affiliated stockholders that it acquires from its public
stockholders. Shares may be purchased through open market
purchases, negotiated transactions or tender offers, or a
combination of the above. It is anticipated that the price
paid to affiliated stockholders will equal the weighted
average price paid to purchase shares from the public
stockholders. Approximately $400 million from the proceeds
of the TransTexas Intercompany Loan was deposited in a
disbursement account to fund the stock repurchase program.
Funds from the disbursement account may also be used to pay
dividends on TransTexas common stock. As of July 31, 1997,
TransTexas had purchased approximately $49.6 million in
value of common stock from the public.
CAPITAL IMPROVEMENT PROGRAM. In connection with the TEC
Notes Offering, the TARC Intercompany Loan and the TARC
Notes Tender Offer, TARC has adopted a revised capital
improvement program designed to increase the capacity and
complexity of the refinery ("Capital Improvement Program").
The most significant projects include: (i) conversion of the
visbreaker unit to a delayed coking unit to process vacuum
tower bottoms into lighter petroleum products, (ii)
modernization and upgrade of a fluid catalytic cracking unit
to increase gasoline production capacity and allow the
direct processing of low cost atmospheric residual
feedstocks, and (iii) upgrading and expanding hydrotreating,
alkylation and sulfur recovery units to increase sour crude
processing capacity. In addition, TARC plans to expand,
modify and add other processing units, tankage and offsite
facilities as part of the Capital Improvement Program. The
Capital Improvement Program includes expenditures necessary
to ensure that the refinery is in compliance with certain
existing air and water discharge regulations and that
gasoline produced will comply with federal standards. TARC
will act as general contractor, but has engaged a number of
specialty consultants and engineering and construction firms
to assist TARC in completing the individual projects that
comprise the Capital Improvement Program. Each of these
firms was selected because of its specialized expertise in a
particular process or unit integral to the Capital
Improvement Program.
The Capital Improvement Program will be executed in two
phases. TARC estimates that Phase I will be completed at a
cost of $223 million, will be tested and operational by
September 30, 1998 and will result in the refinery having
the capacity to process up to 200,000 BPD of sour crude oil.
Phase II of the Capital Improvement Program includes the
completion and start-up of the Fluid Catalytic Cracking Unit
utilizing state-of-the-art MSCC(SM) technology and the
installation of additional equipment expected to further
improve operating margins by allowing for a significant
increase in the refinery's capacity to produce gasoline.
TARC estimates that Phase II will be completed at a cost of
$204 million and will be tested and operational by July 31,
1999. The proceeds received or to be received by TARC from
the TARC Intercompany Loan, the TransTexas stock repurchase
program and the equity contribution from TEC will include
$427 million designated for use in the Capital Improvement
Program, which TARC believes is adequate to fund the
completion of the project. The foregoing estimates, as well
as other estimates and projections herein, are subject to
substantial revision upon the occurrence of future
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events, such as unavailability of financing, engineering
problems, work stoppages and cost overruns over which TARC
may not have any control, and there can be no assurance that
any such projections or estimates will prove accurate.
DISBURSEMENT AND COLLATERAL ACCOUNTS. Pursuant to a
disbursement agreement (the "Disbursement Agreement") among
TARC, TEC, the TEC Indenture Trustee, Firstar Bank of
Minnesota, as disbursement agent (the "Disbursement Agent"),
and Baker & O'Brien, Inc., as construction supervisor (the
"Construction Supervisor"), $208 million of the net proceeds
from the sale of the TEC Notes was placed into accounts in
the name of TARC and TEC (together, the "Disbursement
Account") to be held and invested by the Disbursement Agent
until disbursed. Proceeds to TEC and TARC of approximately
$300 million from the TransTexas stock repurchase program
will also be deposited in the Disbursement Account. All
funds in the Disbursement Account are pledged as security
for the repayment of the TEC Notes.
The Disbursement Agent will make disbursements for the
Capital Improvement Program out of the Disbursement Account
in accordance with requests made by TARC and approved by the
Construction Supervisor. The Construction Supervisor is
required to review each such disbursement request by TARC.
No disbursements may be made from the Disbursement Account
for purposes other than the Capital Improvement Program
other than (i) up to $1.5 million per month (except for
December 1997, in which disbursements may be up to $4.5
million) to fund administrative costs and certain taxes and
insurance payments, not in excess of $25.5 million in the
aggregate; provided, that if less than $1.5 million is spent
in any month (or less than $4.5 million is spent in December
1997) the amounts which may be disbursed in one or more
subsequent months will be increased by the amount of such
difference, (ii) up to $50 million for feedstock upon
certification by the Construction Supervisor that TARC has
satisfactorily completed construction of the Delayed Coking
Unit and associated facilities, (iii) up to $19 million to
pay interest on, and to redeem, repurchase, defease, or
otherwise retire the remaining TARC Notes and (iv) up to
$7.0 million for outstanding accounts payable. In addition,
interest income from the Disbursement Account may be used
for the Capital Improvement Program or disbursed to fund
administrative and other costs of TARC and TEC.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements, pro forma financial
information and exhibits are filed as a part of this report:
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(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro forma financial information:
(1) Pro Forma Condensed Balance Sheet dated April
30, 1997 (unaudited)
(2) Pro Forma Condensed Statement of
Operations for the three months ended
April 30, 1997 (unaudited) and the year
ended January 31, 1997 (unaudited)
(c) Exhibits:
4.1 Second Supplemental Indenture dated June 13, 1997
among the Company, TEC and First Union National
Bank.
4.2 Loan Agreement dated June 13, 1997 between the
Company and TEC.
4.3 Security and Pledge Agreement dated June 13, 1997
by the Company in favor of TEC.
4.4 Disbursement Agreement dated June 13, 1997 among the
Company, TEC, Firstar Bank of Minnesota, as
disbursement agent and trustee and Baker & O'Brien,
Inc., as construction supervisor.
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not applicable.
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PRO FORMA CONDENSED FINANCIAL INFORMATION OF
TRANSAMERICAN REFINING CORPORATION
The following unaudited pro forma condensed financial information of
TransAmerican Refining Corporation (the "Company") as of and for the three
months ended April 30, 1997 and for the year ended January 31, 1997, illustrate
the effect of the transactions (the "Transactions") related to a private
offering of debt securities by TransAmerican Energy Corporation (the "TEC Notes
Offering"). The Transactions consist of the TARC Intercompany Loan, TARC
Warrants Tender Offer, TARC Equity Contribution, TARC Notes Tender Offer and
the TransTexas Stock Repurchase Program, all as described in Item 5 of this
Form 8-K. The unaudited pro forma condensed balance sheet has been prepared
assuming that the TEC Notes Offering and the Transactions were consummated on
April 30, 1997. The unaudited pro forma condensed statements of operations for
the three months ended April 30, 1997 and for the year ended January 31, 1997
have been prepared assuming that the TEC Notes Offering and the Transactions
were consummated on February 1, 1997 and 1996, respectively.
The unaudited pro forma adjustments and the resulting unaudited pro forma
condensed financial information are based on the assumptions noted in the
footnotes thereto. The unaudited pro forma condensed financial information does
not purport to represent what the Company's financial position or results of
operations would have been had the TEC Notes Offering and the Transactions
actually occurred on the dates indicated or the financial position or results
of operations for any future date or period.
The unaudited pro forma condensed financial information and notes thereto
should be read in conjunction with the Company's historical financial
statements and the notes thereto included in the Company's quarterly report on
Form 10-Q for the period ended April 30, 1997 and its annual report on Form
10-K for the period ended January 31, 1997.
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TRANSAMERICAN REFINING CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Historical Adjustments Pro Forma
----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,307 $ 675,649 (a) $ 76,335
167,200 (b)
(767,821)(c)
Debt proceeds held in collateral amount........... 14,037 -- 14,037
Receivable from affiliates........................ 22 -- 22
Other .......................................... 448 -- 448
----------- ----------- -----------
Total current assets........................... 15,814 75,028 90,842
Net property and equipment........................... 567,421 -- 567,421
Disbursement account................................. -- 253,795 (c) 253,795
Receivable from affiliates........................... 503 -- 503
Other assets, net.................................... 24,666 (18,585)(d) 6,081
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$ 608,404 $ 310,238 $ 918,642
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 17,064 $ -- $ 17,064
Payable to affiliates............................. 8,444 (5,370)(c) 3,074
Accrued liabilities............................... 14,377 (3,840)(c) 10,537
Notes payable..................................... 36,000 (36,000)(c) --
----------- ----------- -----------
Total current liabilities...................... 75,885 (45,210) 30,675
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Payable to affiliates................................ 6,674 -- 6,674
Notes payable to affiliate........................... 60,630 675,649 (a) 675,649
(60,630)(c)
Long-term debt....................................... 379,638 (364,452)(c) 15,186
Investment in TransTexas............................. 22,756 (22,756)(b) --
Other................................................ 505 -- 505
Stockholders' equity:
Common stock, $0.01 par value,
100,000 shares authorized,
30,000,000 shares issued and outstanding........ 300 -- 300
Additional paid-in capital........................ 248,513 189,956 (b) 438,469
Accumulated deficit............................... (186,497) (62,319)(e) (248,816)
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Total stockholders' equity..................... 62,316 127,637 189,953
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$ 608,404 $ 310,238 $ 918,642
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The accompanying notes are an integral part of the pro forma financial
statements.
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TRANSAMERICAN REFINING CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) To record the borrowing by the Company of $675.6 million from TEC pursuant
to the TARC Intercompany Loan.
(b) To record the sale of TransTexas common stock pursuant to the TransTexas
Stock Repurchase Program.
Cash to be received...................................................... $ 167,200
Investment in TransTexas................................................. 22,756
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Increase in additional paid-in capital.............................. $ 189,956
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(c) To record the application of a portion of the proceeds from (a) and (b)
above:
Payment of notes and payable to affiliates, including
accrued interest of $4,276........................................... $ 66,000
Repurchase of 96% of the TARC Notes...................................... 364,452
Premium of 12% for the TARC Notes repurchased............................ 43,734(e)
Accrued interest on the TARC Notes repurchased........................... 3,135
Payment of notes payable, including accrued interest of $705............. 36,705
Disbursement Account..................................................... 253,795
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$ 767,821
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Approximately $16 million was used to pay accrued interest, accretion of
principal and premium on such accretion on the TARC Notes tendered in the TARC
Notes Tender Offer for the period from May 1, 1997 through June 13, 1997.
(d) To record the write-off of unamortized debt issue costs related to the
TARC Notes. See (e).
(e) To record the effects on retained earnings as a result of (c) and (d).
Premium of 12% for the TARC Notes repurchased........................ $ 43,734(1)
Unamortized debt issue costs......................................... 18,585(1)
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Net decrease in retained earnings................................ $ 62,319
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(1) These amounts and the related income tax benefits, if any, will be
recorded as an extraordinary charge to income in the period the related
debt is extinguished.
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TRANSAMERICAN REFINING CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Historical Adjustments Pro Forma
----------- ----------- -----------
Revenues:
Product sales................................... $ -- $ -- $ --
----------- ----------- -----------
Costs and expenses:
Costs of products sold.......................... -- -- --
Processing arrangements, net.................... (175) -- (175)
Operations and maintenance...................... 3,613 -- 3,613
Depreciation and amortization................... 1,711 -- 1,711
General and administrative...................... 2,725 1,447 (a) 4,172
Taxes other than income taxes................... 903 -- 903
Loss on purchase commitments.................... 5,090 -- 5,090
----------- ----------- -----------
Total costs and expenses.................. 13,867 1,447 15,314
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Operating loss............................ (13,867) (1,447) (15,314)
----------- ----------- -----------
Other income (expense):
Interest income................................. 127 -- 127
Interest expense, net........................... (3,296) 2,217 (b) (4,841)
(3,762)(c)
Equity in loss of TransTexas.................... (2,050) 2,050 (d) --
Other .......................................... 39 -- 39
----------- ----------- -----------
Total other income (expense).............. (5,180) 505 (4,675)
----------- ----------- -----------
Net loss.................................. $ (19,047) $ (942) $ (19,989)
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Net loss per share................................... $ (0.63) $ (0.67)
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Weighted average number of common
shares outstanding.............................. 30,000,000 30,000,000
=========== ===========
The accompanying notes are an integral part of the pro forma financial
statements.
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TRANSAMERICAN REFINING CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Historical Adjustments Pro Forma
----------- ----------- -----------
Revenues:
Product sales................................... $ 10,857 $ -- $ 10,857
----------- ----------- -----------
Costs and expenses:
Cost of products sold........................... 11,544 -- 11,544
Processing arrangements, net.................... 7,090 -- 7,090
Operations and maintenance...................... 23,945 -- 23,945
Depreciation and amortization................... 7,225 -- 7,225
General and administrative...................... 11,848 5,788 (a) 17,636
Taxes other than income taxes................... 4,200 -- 4,200
----------- ----------- -----------
Total costs and expenses.................. 65,852 5,788 71,640
----------- ----------- -----------
Operating loss............................ (54,995) (5,788) (60,783)
----------- ----------- -----------
Other income (expense):
Interest income................................. 204 -- 204
Interest expense, net........................... (4,663) 2,891 (b) (15,540)
(13,768)(c)
Equity in income of TransTexas.................. 12,325 (12,325)(d) --
Gain on sale of TransTexas stock and other income 56,535 -- 56,535
----------- ----------- -----------
Total other income (expense).............. 64,401 (23,202) 41,199
----------- ----------- -----------
Net income (loss)......................... $ 9,406 $ (28,990) $ (19,584)
=========== =========== ===========
Net income (loss) per share.......................... $ 0.25 $ (0.65)
=========== ===========
Weighted average number of common
shares outstanding.............................. 37,457,836 30,000,000
=========== ===========
The accompanying notes are an integral part of the pro forma financial
statements.
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TRANSAMERICAN REFINING CORPORATION
NOTES TO THE UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To record an increase in additional expenses payable to TransTexas and for
fee for advisory services and other benefits payable to TransAmerican,
both pursuant to the Services Agreement.
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
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Increase in Services Agreement fees.................... $ 822 $ 3,288
Advisory fees to TransAmerican......................... 625 2,500
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$ 1,447 $ 5,788
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(b) To adjust interest expense as follows:
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
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Historical interest on 90% of Mortgage Notes........... $ (3,895) $ (15,517)
Historical interest on 98% of Discount Notes........... (13,430) (47,482)
Historical interest on intercompany debt............... (2,038) (2,237)
Historical interest on notes payable................... (705) --
Interest expense on the TARC Intercompany Loan at
a rate of 16% (1)................................... 19,051 65,971
Amortization of historical debt issuance costs......... (1,200) (3,626)
---------- ----------
Total adjustment to interest expense.............. $ (2,217) $ (2,891)
========== ==========
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(1) Based on actual debt outstanding at April 30, 1997 and January 31,
1997. Pro forma interest expense on the entire TARC Intercompany Loan
is approximately $27.0 million and $112.4 million at April 30, 1997
and January 31, 1997, respectively.
(c) To adjust capitalized interest as a result of the lower weighted average
interest rate resulting from the TARC Intercompany Loan.
(d) To record the effect of the sale of the Company's investment in TransTexas
pursuant to the TransTexas Stock Repurchase Program.
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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 hereunto duly authorized.
TRANSAMERICAN REFINING CORPORATION
By: /s/ ED DONAHUE
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Name: Ed Donahue
Title: Vice President
Dated: August 15, 1997
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EXHIBITS
Exhibit
No. Description
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4.1 Second Supplemental Indenture dated June 13, 1997 among the
Company, TEC and First Union National Bank.
4.2 Loan Agreement dated June 13, 1997 between the Company and
TEC.
4.3 Security and Pledge Agreement dated June 13, 1997 by the
Company in favor of TEC.
4.4 Disbursement Agreement dated June 13, 1997 among the Company,
TEC, Firstar Bank of Minnesota, as disbursement agent and
trustee and Baker & O'Brien, Inc., as construction
supervisor.