More than 700 court documents, dozens of boxes of company records and a smattering of corporate assets scattered throughout Western Washington are all that remain of a once-proud Pierce County company that last year served some 10,000 customers from Port Angeles to Tacoma.
Now the bones of Pettit Oil Co., once the 33rd-largest privately held company in the Evergreen State, are being picked over by lawyers in federal bankruptcy court.
Pettit Oil abruptly ceased to exist as an operating business Jan. 17. That’s when a bankruptcy court judge, prompted by arguments from Pettit’s banks, rejected bids from other oil companies to buy Pettit.
Instead, the court decided, the company would be liquidated, its assets sold, its bank accounts frozen, its employees dismissed, and the proceeds of those sales distributed to the company’s creditors. At that point, there weren’t many good choices.
Sign Up and Save
Get six months of free digital access to The News Tribune
Caught in the crossfire between the lawyers representing Pettit and major Pettit creditors were hundreds of home heating oil customers who found themselves suddenly cut off from their source of oil to heat their homes during winter’s coldest month.
Many of those customers had made advance payments to Pettit for home heating oil they would never receive. That left them scrambling to find new suppliers and additional money to pay for the oil.
Among them was 74-year-old Tacoman Doris Clarke. Clarke had paid Pettit $1,100 on a budget plan designed to even out her home heating oil bills throughout the year.
She discovered from a newspaper article that Pettit had gone out of business.
Though Clarke found a new oil dealer and the money to pay him, she continued to receive bills from Pettit two months after the company closed.
Then there was Vera Conley, a 93-year-old central Tacoma widow. In a letter to the bankruptcy court, Conley’s daughter Darlene recounted how her mom discovered Pettit was no longer in business.
“She found out when her furnace stopped working the second week of January, and her furnace repair man (from an independent company) informed her that Pettit had filed for Chapter 11,” she wrote the court.
Conley’s heating shutdown happened despite having a $2,508 credit in her Pettit Oil account, lowering her thermostat to cut consumption and using space heaters.
Conley had accumulated such a large balance because she didn’t want to be caught short of fuel during the winter when her monthly oil bill could run as high as $900.
Ultimately, however, her furnace gave out for lack of oil.
Many among the Pettit customers who contacted The News Tribune after a report of the company’s demise said the abrupt closure left them in a difficult spot.
“I’m about out of oil, and I don’t have the money to fill up the tank again,” said one elderly customer who didn’t want his name used.
Attorneys say it might take as long as two years more before those customers learn whether money will be left to reimburse them.
Commercial Pettit customers, including The News Tribune, also felt the sudden effects of Petitt’s bankruptcy.
The newspaper’s transportation operation discovered Pettit’s shutdown when cards the oil company had issued to The News Tribune failed to function when News Tribune truck drivers tried to fill up at cardlock stations, said Wes Corey, The News Tribune’s operations manager. The paper hastily made other arrangements to refuel its fleet.
By several accounts, the demise of Pettit Oil was among the more abrupt and chaotic in the history of large company failures in the Northwest.
“I’ve been in this business for quite a few years,” said lawyer and bankruptcy specialist Deborah Crabbe. “This is probably the worst I’ve ever seen.”
When the court converted the company’s bankruptcy from reorganization to liquidation, the firm immediately shut down, laying off its 119 employees and closing its offices.
With no employees available to handle the business of powering down the operations, the closure was difficult.
Crabbe said she and court trustee Kathryn Ellis spent long days trying to reconstruct Pettit’s customer lists. Once those lists were organized, they sent notices to its thousands of customers that they could file claims for money owed them.
One of the major banks that had loaned money to Pettit hired several former Pettit employees in an attempt to unravel the company’s accounts.
The company originally had filed to reorganize under the bankruptcy code in November of last year, but when the company’s credit dried up because of that filing, the prospects of reorganizing quickly grew more distant.
As a company involved in a business with heavy cash requirements — Pettit’s revenues were reportedly in excess of $300 million a year — Pettit couldn’t exist for long without credit to carry it through the period between the time it delivered its products and the time its customers paid.
That’s one reason why Pettit heavily promoted its budget payment plan to customers. Under that plan, people would pay higher monthly amounts during the warm weather months when their need for heating oil was low to help pay for the high costs during the winter when oil costs and use grew. Those on the budget plan were essentially giving Pettit an interest-free loan.
But those budget plan advances weren’t enough to meet the company’s cash requirements when demand for oil accelerated.
Brian Budsberg, the Olympia attorney who represented Pettit in the bankruptcy proceedings, says the company’s fate was sealed when an accounting glitch caused one of the company’s checks to be returned. The oil company quickly made the check good, but the oil supplier cut back the company’s line of credit.
SEEDS OF TROUBLE
While last fall’s credit crisis was the immediate cause of Pettit’s demise, the seeds of that trouble apparently had been planted two years before, when Pettit changed its business plan.
It was then that Pettit, which had been focused on fuel distribution to service stations and retail and industrial fuel and lubricant sales for much of its existence, acquired the Western Washington home heating oil business of SC Fuels, a Southern California-based petroleum distributor.
The home heating oil business, though it deals in the same basic product that Pettit had sold for years, is an entirely different kind of business, said Luke Xitco, president of Tacoma’s Associated Petroleum Products.
The heating oil business deals with thousands of retail customers with deliveries to each of their homes instead of larger commercial customers with deliveries to a relatively few service stations. In the cardlock service station business, payment typically takes three days. In the home heating oil business, payment lag time can be 30 to 60 days, according to an industry expert.
When Pettit bought the home heating oil business, it reportedly pulled back from its retail gasoline business, selling company-owned stations.
What was behind Pettit’s change in strategy? None of the company’s former officers was available for comment. Norman Sather, the company’s chairman and former owner, is not involved in the company’s liquidation. He reportedly now is ill.
His son, Chris, likewise, has retreated from involvement with the company’s disposition. The company’s chief executive officer, James R. Tener, was terminated two hours before the Nov. 25 bankruptcy reorganization filing, according to court records.
In a February court filing opposing court authorization of attorney fees to Budsberg, Pettit’s bankruptcy counsel, Crabbe contends the bankruptcy was poorly handled.
“This bankruptcy appears to have been filed with very little planning,” the Seattle attorney contends. “There were numerous amendments to the schedules, yet, at no time were the schedules amended to include the thousands of home heating oil customers who paid deposits to the debtor and never received their heating oil,” she wrote.
“The trustee is now left to figure out (with no Pettit employees) how to create this list so that these creditors can file claims,” she said.
Crabbe also contended the bankruptcy was doomed because Pettit failed to secure financing before it filed to continue operating its business during reorganization.
Budsberg did not return calls seeking comment.
In early April, appearing in court, Crabbe summarized her frustrations.
“I’ve been doing this 22 years, and I’ve never had a case that is so fraught with issues: no sense of organization, no sense of how to get these hurdles accomplished, so many issues not handled before the bankruptcy,” she declared in court before bankruptcy Judge Paul Snyder. “It is a hairball.”
The judge agreed. “It is,” he said.