EP Energy 1.125-lien notes trustee says amended plan is not feasible

By Caroline Salls

Pittsburgh, Feb. 21 – EP Energy Corp. 1.125-lien notes trustee UMB Bank, NA objected to confirmation of the company’s fourth amended plan of reorganization, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

“The debtors have selected an exceptionally narrow path to confirmation, with success or failure hinging on whether the debtors’ treatment of class 4 1.125L notes claims ‘impairs’ such claims within the meaning of section 1124 of the Bankruptcy Code,” the trustee said in its objection. “If the 1.125L notes claims are impaired, the plan fails.”

Specifically, the trustee said the plan alters and impairs the 1.125-lien notes claims by seeking to reinstate them in an amount of $177.65 million, which is less than the amount of the oversecured notes claims.

Since the Bankruptcy Code prohibits the reinstatement of the oversecured notes claims in an amount that is less than the full deemed amount, which the trustee said in the objection is $1,177,651,774, UMB Bank said the notes claims are impaired and the plan cannot be confirmed.

In addition, the trustee said although the plan generally provides for reinstatement of 1.25-lien notes, $138 million in principal amount of those notes held by supporting noteholders will instead be exchanged for new common shares at a 25.7% discount to the stated equity value.

As a result, although all allowed 1.25-lien notes claims are placed into the same creditor class under the plan, the holders of those notes will not all receive the same treatment.

The trustee also said the plan is not feasible because it will leave EP Energy overleveraged, and the company’s business plan and projections, which are dependent upon its conversion into a single-basin operator in its largely untested basin in Northeastern Utah, “are speculative and unrealistic.”

The oil and natural gas exploration and production company is based in Houston. The company filed bankruptcy on Oct. 3 under Chapter 11 case number 19-35654.

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