Magnum Hunter’s equity holders move to appoint official committee

By Sheri Kasprzak

New York, Feb. 26 – The ad hoc group of equity holders in Magnum Hunter Resources Corp.’s Chapter 11 bankruptcy case is seeking to appoint an official committee of equity security holders, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

“Although an official equity committee should be appointed only in exceptional cases, the Exide ruling, issued by the U.S. District Court in this district, provides additional guidance in applying these factors, stating: In determining whether equity holders are likely to receive a distribution, courts review the costs associated with appointing an official committee as compared to the debtor’s solvency,” said the filing.

“If a debtor appears to be ‘hopelessly insolvent,’ the appointment of an official equity committee is generally regarded as unjustified. If a debtor does not appear to be ‘hopelessly insolvent,’ courts consider the following additional factors in determining whether the equity holders are adequately represented without the appointment of an official committee: Whether the shares are widely held and publicly traded; the size and complexity of the Chapter 11; and the timing of the motion relative to the status of the Chapter 11 case.”

According to the motion, the ad hoc group and other shareholders in cases like this assert that the debtors are not hopelessly insolvent and there is a substantial likelihood that shareholders are entitled to a “meaningful distribution in these cases.” The debtors, the group contends in its filing, have abandoned their duty to protect the shareholders’ interests.

“Having been abandoned by their fiduciaries, shareholders have turned to this court seeking the appointment of an equity committee so that the interests of shareholders will be adequately represented in these proceedings,” the filing said.

Based in Irving, Texas, Magnum Hunter is an oil and gas exploration company. It filed for Chapter 11 relief on Dec. 15, 2015, under the case number 15-12533.

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