(Bloomberg) -- Petroplus Holdings AG, the Swiss refiner that shut three plants after having its credit lines suspended last month, said it plans to file for insolvency after talks with lenders failed.
    
The company will seek to ensure that operations are “safely shut down and to preserve value for all stakeholders,” according to a statement today.

European refiners have cut capacity as slowing economic growth erodes fuel demand, squeezing profit margins. Petroplus, based in Zug, Switzerland, and Europe’s largest independent refiner, had about $1 billion in credit lines frozen last month, preventing it from supplying its plants with crude.

“We have worked hard to avoid this outcome, but were ultimately not able to come to an agreement with our lenders to resolve these issues given the very tight and difficult European credit and refining markets,” Chief Executive Officer Jean-Paul Vettier said in the statement.

Petroplus said last week that it may sell refineries in France, Belgium and Switzerland, while continuing to operate the plants in the U.K. and Germany. As well trying to renegotiate financing with its banks, Petroplus had also been seeking a crude supply deal on terms that would reduce the cash needed to keep refineries going.

The failure of the talks constitutes “an event of default under the $1.75 billion aggregate principal amount of outstanding senior notes and convertible bonds of Petroplus Finance Limited,” the company said today.

The company’s shares were suspended from trading in Swizerland yesterday. The stock has lost 99 percent of its value since 2007.

The refiner had halted deliveries from its U.K. plant after lenders forced it to stop selling fuel, Richard Howitt, a European Parliament member for the east of England, said in a statement yesterday.

Earlier this month, the company reached a temporary agreement with creditors to keep plants in Coryton, U.K., and Ingolstadt, Germany, in operation. Petroplus’s credit rating was cut by Standard & Poor’s for a second time on Jan. 17.

The outlook for oil refining in the next two decades is “dire” given excess capacity in the industry, BP’s Chief Economist Christof Ruehl said on Jan. 18. Other refineries in Europe have been forced to close because overcapacity is making it unprofitable to turn crude oil into gasoline and other fuels.

LyondellBasell Industries NV decided to close its 105,000 barrel-a-day Berre refinery in France after failing to find a buyer.