Star Gas Partners LP on Monday said it has suspended distributions on its common partnership units and warned it may have to seek bankruptcy protection unless it can arrange new financing for its Petro heating oil unit.
Star, a distributor of propane and heating oil, said its Petro unit has suffered from an inability to pass on record heating oil prices to customers and from a larger-than-expected loss of customers.
The Stamford, Connecticut-based company said it expects that the unit's net income in 2004 "will be substantially below" net income for fiscal 2003 and that net income for fiscal 2005 will be lower than 2004 earnings.
Star said it is talking with its lenders so Petro can operate through the winter heating season.
Star said Petro is entering the heating season when it is most in need of working capital borrowings, but this year it has been hurt by the current record prices for home heating oil, reaching $1.55 per gallon on October 15, up 25 percent from a month earlier - 54 percent higher than June 30 and almost 80 percent above a year earlier.
The increase will require Petro to borrow more than it has in prior years to purchase oil, the company said.
Star said the higher price of heating oil has impacted Petro's margins and added to Petro's difficulties in reducing customer attrition.