Dueling KLU buyers
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Order authorizes Furie to enter into sale agreement; HEX counteroffers
Steve Sutherlin Petroleum News
Judge Laurie Selber Silverstein has signed an order authorizing Furie Operating Alaska LLC to enter into an acquisition by foreclosure agreement with a new buyer: Kachemak Exploration LLC, a Delaware corporation recently formed by John Upton’s GFR Holdings of Fort Worth, Texas, and Melody Capital Partners L.P., represented by Melody executive Blake Yaralian.
The order, signed Feb. 21 in the U.S. Bankruptcy Court for the District of Delaware, opens the door to replace Anchorage-based HEX LLC - which was previously named the successful bidder in the sale process of the Chapter 11 bankruptcy case of Furie and its related companies.
The assets in the sale are primarily the Cook Inlet Kitchen Lights offshore unit, related infrastructure such as the Julius R offshore natural gas platform, together with onshore processing facility and related pipelines.
The order authorizes each of the debtors and the acquirer to enter into and perform, consummate and implement the escrow letter, together with all additional instruments and documents that may be reasonably necessary or desirable to implement the letter and to take any and all further actions to perform its obligations.
The order said the debtors have demonstrated at this time good, sufficient and sound business purposes and justifications for entry into the agreement.
The acquirer has made a deposit into escrow of $200,000 as part of the acquisition agreement.
In connection with the acquisition, the acquirer agrees to pay the debtors an amount equal to $2 million, to be used solely to satisfy allowed fee claims and allowed administrative claims.
According to a support declaration by Scott Pinsonnault, Furie interim COO, filed on Feb. 18, “$1,050,000 in cash will be paid to certain creditors for the benefit of the debtors to resolve matters settled pursuant to the stipulations and settlements.”
The declaration said the consideration includes forgiveness of $3 million in principal owed to the Melody Lenders under the debtors’ debtor-in-possession financing facility, and that $103 million in debt secured by the assets of the reorganized debtors will be provided to the debtors’ prepetition and remaining DIP lenders in full and final satisfaction of such lenders’ claims.
Pinsonnault said Melody Capital has provided financial statements and evidence demonstrating the acquirer’s ability to consummate the transaction.
Notice of alternative offer filed by HEX LLC According to documents filed in the bankruptcy case, HEX LLC was unable to raise funds needed to complete the transaction.
According to the support declaration by Scott Pinsonnault, Furie interim COO, filed on Feb. 18, HEX failed to make good faith deposits on Dec. 24 or Jan. 10 or provide proof of financial wherewithal to consummate a transaction by Jan. 10, each as required under the terms of its bid.
The unpaid good faith deposits were to be $500,000 and $750,000 respectively, according to Pinsonnault.
Pinsonnault said: “the Debtors determined, in the exercise of their fiduciary duties, that HEX was unable to consummate the transactions contemplated by the subsequent HEX bid and, therefore, was no longer a Qualified Bidder.”
But HEX disagrees with that assertion and has made a counteroffer to the debtors’ counsel, per the Feb. 21 clerk’s docket.
In a notice of alternative offer filed Feb. 20 by HEX, HEX said it was unable to complete financing for the purchase primarily due to uncertainty created by the pending royalty dispute with the RWIO (royalty and working interest owners) group, adding that HEX could not forecast its future income and expenses, therefore its lenders were unwilling to commit.
The debtors filed a Feb. 18 motion for approval of a settlement between the debtors, the lender parties, the buyer, the Webb litigants and the RWIO parties.
Also on Feb. 18, pursuant to the settlement agreement and mutual release, counsel for Giza Holdings LLC, Taylor Minerals LLC, Allen Lawrence Berry, the 2007 Allen Lawrence Berry Trust and Danny Davis withdrew the objections of the royalty and working interest owners (RWIO Litigants) - which were filed with the court on Dec. 17.
“HEX disputes the assertion that it has not operated in good faith. HEX needed to know exactly what it was buying,” HEX said in its notice of alternative filing, adding that without the settlements which were established Feb. 18, HEX was unable to complete the transaction.
The settlements were negotiated without HEX’s participation, the notice said.
“On Feb 18 HEX was advised the debtors considered HEX in default and were proceeding with ... an alternative transaction,” the notice said. “At the same time HEX was informed that the disputes with Bruce Webb and the RWIO group will be settled for about $500,000 each, plus restructuring of the RWIO royalties to a 10% working interest carried on capex (as far as HEX is aware).”
“The proposed transfer and settlement documents take up over 700 pages on the docket, and HEX has not had sufficient time to digest them fully,” the notice said. “HEX was invited late on February 18th to submit a counter offer and HEX made a proposal to debtor’s counsel.”
HEX indicated that the new proposed sale was a significant departure from the structure previously set forth in the bidding procedures for Furie’s assets.
“Although originally advertised as an asset sale, the auction was conducted as a sale of the debtors’ equity as it appeared important to retain the debtors as operating entities in order to receive tax credit payments due from the state of Alaska,” the notice said. “The tax credits are by far the most valuable assets of the debtors, and with an equity sale the debtor’s lenders will retain rights to receive those payments.”
HEX indicated it will stay in the running to buy the assets despite the bid for the assets made by Kachemak.
“HEX understands that the pending sale motion will go forward, but the debtors have agreed to work with HEX for two weeks to see if a better transaction can be structured,” the notice said.
Sale and settlement matters set for March 3 hearing Judge Selber Silverstein will consider a number of matters in a hearing scheduled for March 3 at 2 p.m. Eastern, at the U. S. Bankruptcy Court, 824 Market Street, 6th floor courtroom in Wilmington, Delaware.
Selber Silverstein will hear the debtors’ motion for approval of settlement between the debtors, the lender parties, the buyer, the Webb litigants and the RWIO parties, filed by Furie. Objections are due by March 2.
The judge will also consider a notice of sale of property free and clear of liens, including a notice of proposed sale approval order; and an assumption and assignment of executory contracts or unexpired leases and cure amount filed by Furie. Objections are due by March 2.
The judge will hear a motion for approval of settlement between the debtors and Alaska Pipeline Co. filed by Furie, with objections due March 2.
Selber Silverstein will also hear a motion to establish administrative claims bar date, a debtors’ motion for entry of an order establishing an administrative bar date and approving the form and manner of notice filed by Furie. Objections are due by March 26.
Order signed to speed up sale plan Judge Selber Silverstein signed an order Feb. 27 granting the debtors’ motion for a shortened notice and objection period, an expedited hearing and an expedited ruling with respect to debtors’ motion for entry of an order approving disclosure statement; establishing voting record date, voting deadline and other dates; approving procedures for soliciting, receiving, and tabulating votes on plan and for filing objections to plan; approving manner and forms of notice and other related documents; and granting related relief.
The hearing on the disclosure statement motion is scheduled for March 25 at 2 p.m. prevailing Eastern Time.
In the motion, the debtors said expedited consideration is necessary to allow the creditors to capture the benefits of the acquisition by foreclosure agreement dated Feb. 17 between the debtors and Kachemak Exploration as the acquirer, or any other competing offer that the debtors determine is more favorable before market conditions change.
Shortening the notice period is necessary to protect the value of the debtors’ estate, the motion said. “Over the course of 7 months, the limited liquidity provided by the debtor-in-possession financing has been severely taxed by numerous contested matters, including those brought by Bruce Webb and the Webb Family Trust, certain royalty and working interest holders, and the Alaska Pipeline Company, each of which has been consensually resolved, subject to court approval,” it said. “The debtors are now prepared to move forward with their cases, but the drain on the debtors’ resources by these contested matters has not gone unnoticed.”
Upon permission to solicit creditors, under the debtors’ proposed timeline creditors would have 28 days to review and vote on the plan, and 38 days until the confirmation hearing, the motion said, adding that the debtors believe that no parties in interest will be prejudiced by shortening notice of the disclosure statement rearing as they will have ample time to review and vote on the plan.
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