Breitburn Energy Partners submitted an amended recovery plan last week that boosts cash payouts to holdout creditors.

Creditors the downtown-based oil partnership, meanwhile, reached a tentative agreement on a deal that would limit tax liabilities for shareholders

The amended plan was filed on March 13, four days after U.S. Bankruptcy Court Judge Stuart Bernstein in Manhattan rejected a proposal to split the company into two creditor- owned entities. Bernstein ruled that plan treated individual bondholders differently than a select group of institutional bondholders.

That new deal calls for Breitburn to offer the same cash recovery opportunity for the individual bondholders as it has to the institutional bondholders, according to a Reuters report.

The plan amendments filed on March 13 keep the general structure of splitting the company into two entities – one containing prime oil assets in the West Texas Permian Basin, and the other containing the remaining assets in the Rocky Mountains, California and the upper Midwest. But they contain more cash recovery provisions for unsecured noteholders. The cash recovery rate for one group of unsecured noteholders was nearly tripled to 11.94 percent from 4.5 percent.

Separately, the creditors who are poised to own the two successor companies have tentatively promised not to convert them from limited partnerships to corporate entities. That would likely avoid the hefty tax bills that shareholders were facing as debts are forgiven through the bankruptcy process, according to Martin Bienenstock, an attorney with Proskauer Rose, the law firm representing Breitburn shareholders.

Proskauer Rose attorneys had calculated the bankruptcy exit plan would forgive roughly $525 million in debt.

Since Breitburn shares are practically worthless (1.3 cents a share as of close on March 14), the absence of such an agreement would leave larger shareholders susceptible to five- and six-figure tax bills.

Breitburn filed for bankruptcy in May 2016, one of many oil companies hit by the oil price collapse of late 2014-2015. The partnership was hit especially hard because it incurred $2 billion in debt to finance a purchase of another oil company just three months before the market imploded.

Attorneys for Breitburn said a final approval for the plan is needed before covenants on terms of the company’s latest refinancing deal expire on March 31.

– Howard Fine