Prax Lindsey Oil Refinery - Case Update

The joint administrators of State Oil Limited, the parent company of the embattled Prax Lindsay Oil Refinery, have released their report outlining how “material irregularities” in the Prax Group’s £783 million loan facility contributed to its collapse. Meanwhile, the whereabouts of the group’s owner remain uncertain as the administrators pursue him in court for allegedly breaching his fiduciary duties.

The Prax Oil Group operates the Prax Oil Refinery in Northern England—one of the last five in the UK. Its ultimate parent company is Prax Group Holdings Limited, which is 40% owned by Winston Soosaipillai and 40% owned by his wife Arani, with the remaining 20% held by Soosaipillai family trusts.

State Oil and five other group companies entered administration on 30 June, with Clare Boardman, Matthew Roe and Paul Meadows of Teneo appointed as joint administrators, while certain other group companies were placed into liquidation, with Official Receiver Gareth Allen appointed as liquidator, and Matthew Callaghan, Andrew Johnson, Joanne Hewitt-Schembri and Samuel Ballinger of FTI Consulting appointed as special managers to assist the Official Receiver.

Since their appointment, the joint administrators have commenced their investigations into the reasons for the Group’s collapse and any potential claims against the directors. They report that the Group has been struggling with the refinery since acquiring it in 2021. Significant capital outlays, frequent maintenance shutdowns and lower refining margins have caused the refinery’s financial position to suffer. HMRC is owed £70 million by one group entity, while Shell is owed more than £10 million. Employees are also owed a combined £4.2 million.

In response to its deteriorating liquidity position, the Group started exploring options for alternative funding and M&A options. However, “material irregularities” related to the £783 million securitisation facility arranged by HSBC were reported to the State Oil board in late June, and the board concluded that "operation of the facility should cease with immediate effect”.

The administrators also acknowledge the allegations concerning “potential irregularities” in the companies' financial affairs prior to insolvency. In view of those allegations, they have taken additional steps to secure and impose new governance arrangements for the group entities which remain outside of insolvency.

In addition, the administrators reveal that they filed a claim against Mr Soosaipillai for allegedly breaching his fiduciary duties in mid-July. However, Mr Soosaipillai has reportedly been unreachable since Prax collapsed, with insiders speculating he has left the country.

Read the administrators’ proposals HERE. They have been assisted by Ashurst, Browne Jacobson, Charles Russell Speechlys, Eversheds, Sanderson Weatherall and Savills.