KiOR unsecured creditor asks court to deny approval of plan disclosure

By Kali Hays

New York, Jan. 16 – KiOR, Inc.’s largest unsecured creditor, the Mississippi Development Authority (MDA), objected to the disclosure statement related to the company’s amended plan of reorganization, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

MDA claims that the disclosure statement does not contain adequate information and that it does not “accurately address or describe” the recent revisions to the plan.

As previously reported, KiOR filed the revised plan Jan. 15 removing distribution for holders of third-lien claims.

In addition, MDA claims that the description of the restructuring transaction in the disclosure statement “fails to inform creditors of what is really happening in this case and with the debtor’s business.”

“The description of the restructuring transaction states that the debtor’s business will be preserved as a ‘going concern,’ but does not inform creditors that the debtor has no commercially viable product, the debtor needs significant additional time and capital in order to continue its efforts to discover a workable product – potentially hundreds of millions of dollars; and its efforts to commercialize a product may never be successful,” the objection stated.

MDA also takes issue with KiOR’s claim that the transaction was “negotiated at arm’s length and in good faith” as all of the negotiation parties “were insiders or otherwise closely related to the debtor” and the lack of mention of MDA’s Dec. 23 motion requesting Chapter 7 conversion or dismissal of the bankruptcy case “on the basis’ of such parties’ bad faith in filing and structuring this case to inure to the ultimate benefit of them.”

As reported, affiliates of Vinod Khosla that provide senior secured financing to KiOR are also the sole bidder for substantially all the company’s assets.

Under a stalking horse agreement, KiOR’s business will be preserved as a going concern through the cancellation of existing equity and the issuance of new equity interests to the stalking-horse bidder.

The objection goes on to allege that the descriptions of the proposed source for distributions to general unsecured creditors and the releases “to a host of parties that may otherwise face scrutiny” are also inadequate.

MDA asked that approval of the disclosure statement be denied and that revisions be ordered by the court.

A hearing is scheduled for Jan. 23.

KiOR is a Pasadena, Texas-based development-stage, next-generation renewable fuels company that filed for bankruptcy on Nov. 10. The Chapter 11 case number is 14-12514.

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