Emerge Energy committee speaks out against HPS control over company

By Caroline Salls

Pittsburgh, Sept. 3 – Emerge Energy Services LP’s official committee of unsecured creditors objected to the proposed approval of the disclosure statement for the company’s plan of reorganization, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said Emerge Energy’s lender HPS Investment Partners, LLC “has maneuvered to put itself in a position to exercise undue control over the debtors and these Chapter 11 cases so as to fast track the restructuring set forth in the pre-negotiated [restructuring support agreement] and attendant plan, thereby achieving its goal of wiping out hundreds of millions of dollars of debt (including, by the debtors’ estimation, a staggering $574 million of unsecured debt) for its own benefit.”

If the proposed plan is confirmed, the committee said the HPS-controlled pre-bankruptcy noteholders would receive substantially all of the reorganized company’s value in the form of debt and equity just over 100 days from Emerge Energy’s bankruptcy filing.

According to the objection, the company’s senior management told the board of directors in a January 2019 presentation that the lenders “have become more aggressive and are now dictating what the company can and cannot do.”

The committee said the disclosure statement does not provide details on HPS’s role in hand-picking the two members of a special restructuring committee created by the restructuring support agreement and given sole authority to act for Emerge Energy in prosecuting the plan, or on HPS’s role in negotiating a global settlement and releases included in the plan.

“Not only has HPS stacked the deck in order to control the debtors’ restructuring, but HPS also intends, as the proposed majority owner of the post-emergence reorganized debtors, to grant itself and others, including the directors and officers, a release, even if this court does not do so,” the objection said.

A hearing is scheduled for Thursday.

Southlake, Tex.-based Emerge Energy Services is a limited partnership formed in 2012 by management and affiliates of Insight Equity Management Co. LLC to own, operate, acquire and develop a portfolio of energy service assets. The company filed for bankruptcy on July 15 under Chapter 11 case number 19-11563.

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