The long wait for a resolution is getting longer for shareholders and creditors of bankrupt downtown-based oil company Breitburn Energy
Breitburn’s attorneys filed late last month in Southern District of New York Bankruptcy Court for yet another set of extensions to come up with a reorganization plan to resolve the nearly 17-month-old case. The attorneys are now requesting until the end of the year to round up the required creditor votes for a plan. Judge Stuart Bernstein is set to hear the request next week.
“The plan negotiation process is at a critical stage,” Breitburn’s attorneys, Stephen Karotkin and Ray Schrock of the New York law firm Weil Gotshal & Manges, said in their Sept. 27 filing.
They said that 58.5 percent of unsecured noteholders and “nearly all” holders of second lien notes support a deal combining an equity infusion and asset sale.
However, a group of bondholders who oppose the plan have come up with a competing proposal that would give them almost full equity in a reorganized company.
The latest extension would be the fifth in the case since it was filed in May 2016. Filings by attorneys in each instance have said negotiators need just a little more time to reach an agreement among bondholders, senior note holders and other creditors. The company, headed by Chief Executive Hal Washburn, is an oil exploration master limited partnership, a model that passes income directly to shareholders. It also passes tax liability for debt repayments onto the shareholders in cases of bankruptcy.
The company filed for Chapter 11 bankruptcy protection, contending a collapse in oil prices left it unable to pay $2 billion in debt incurred to make a major acquisition in July 2014, just three months before the market began its swoon.
Breitburn has continued to pump and sell oil, but with prices at less than half of their 2014 peak, the company is operating at a loss. It posted an operating loss of $33.3 million in the second quarter, according to its most recent Securities and Exchange Commission filing, though that’s an improvement from the $145 million operating loss for the same period a year earlier.
Breitburn had spent 507 days in bankruptcy as of Oct. 5, nearly twice the 254-day median time for oil and gas companies emerging from bankruptcy this year, according to the UCLA-LoPucki Bankruptcy Research Database maintained by UCLA Law Professor Lynn LoPucki.
– Howard Fine
For reprint and licensing requests for this article, CLICK HERE.