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Hess creditors seek dismissal of Virgin Islands bankruptcy

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Creditors say there is "nothing to reorganize"

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Bankruptcy's "sole purpose" is to protect Hess from asbestos claims, creditors say

Sept 23 (Reuters) - The creditors of a bankrupt Hess Corp subsidiary have asked a U.S. judge to dismiss the company's bankruptcy case, saying it serves no purpose other than to protect Hess from lawsuits related to asbestos exposure at a Virgin Islands oil refinery.

The creditors allege that Hess, a $37 billion energy company, is abusing U.S. bankruptcy laws to dodge 900 claims stemming from asbestos contamination at a St. Croix refinery that it operated for decades, according to a motion filed Thursday in Houston bankruptcy court.

Asbestos at the refinery caused lung disease and cancer, including mesothelioma, according to the official creditors committee in the bankruptcy case.

Hess subsidiary HONX filed for Chapter 11 protection in Houston on April 29, saying it intended to take advantage of the “breathing spell” of a bankruptcy case to reach a fair and efficient resolution of asbestos claims against Hess.

In Thursday’s filing, the creditors committee said HONX has no need for a "breathing spell" because it is a mere "husk of a company" that has been re-animated as a shield against lawsuits. HONX's predecessor company ran the St. Croix refinery from 1965 to 1998, and the refinery has since been sold to new owners not affiliated with Hess.

"There is nothing here to resuscitate," the creditors wrote.

Hess said Friday that HONX's bankruptcy offers the best way to reach a "timely and orderly" resolution of all asbestos claims related to the St. Croix refinery.

The creditors argue that the asbestos lawsuits should be allowed to proceed against Hess outside of bankruptcy court. Allowing litigation to proceed would not harm HONX, which has no operations or assets to disrupt, according to the creditors.

Hess is "terrified" to face juries in the Virgin Islands, where it has benefited from generous tax breaks while causing "devastating" damage to St. Croix's air quality and water supply, the creditors wrote.

Those fears grew especially acute after the passage of a 2021 local law that expedited trials for claimants that are elderly or in poor health. Hess has never gone to trial in a Virgin Islands asbestos case, settling more than 1,000 cases to date, according to the creditors.

The case is HONX Inc, U.S. Bankruptcy Court for the Southern District of Texas, No. 22-90035.

For HONX: Christopher T. Greco, Matthew C. Fagen, Jaimie Fedell and Heidi Hockberger of Kirkland & Ellis LLP.

For the creditors committee: Marty Brimmage and Arik Preis of Akin Gump Strauss Hauer & Feld Related links

Caribbean refinery decommissioning will take months -company

How a bankruptcy ‘innovation’ halted thousands of lawsuits from sick plaintiffs

Investors balk as bankrupt St. Croix refinery needs $1 bln to be viable (Reporting by Nimitt Dixit)