Petroleum product distribution services provider SMF Energy Corp. (FUEL) Monday said it voluntarily filed for reorganization under Chapter 11. In pre-market, the shares plunged about 63 percent.
As per the filing with the Southern District of Florida, the company and its subsidiaries H & W Petroleum Co. Inc., SMF Services, Inc., and Streicher Realty, Inc. will operate as "debtors in possession" under the jurisdiction of the Court.
The move resulted from the company's unsuccessful efforts to reduce operating losses by increasing revenue and decreasing expenses. Competitive pressures prevented it from increasing prices. Consequently, the company intends to continue to pursue strategic alternatives after the Voluntary Petitions, for those portions of its business that have a discernible value as an ongoing enterprise.
It was on last Friday that SMF Energy received a declaration from its principal lender Wells Fargo Bank, N.A, of various "Events of Default" as per their Loan and Security Agreement dated September 26, 2002. The lender also declared its intention not to make any further revolving loans to the company.
According to SMF Energy, the current balance owed to the lender under the agreement is nearly $11.2 million, consisting of around $8 million in revolving loans, a $2.2 million unpaid balance of a term loan, and a $1 million mortgage loan.
Last month, the company announced that it expected a substantial reduction in sales revenue and earnings for the quarter ended March 31, 2012, and future periods. It forecast a loss for the quarters ending March 31, 2012, and June 30, 2012, as a result of certain changes made to its pricing structure. Its Board of Directors determined to suspend the company's quarterly dividend program until further notice.
The company had also disclosed its intention to consider an overhaul of its business model, in an effort to drastically reduce its back office and interest expense. It was also actively pursuing strategic alternatives, including potential business combinations and development of new business partnerships.
FUEL closed Friday's regular trading at $0.84 on the Nasdaq. In the pre-market activity, the shares plunged 63.1 percent.
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