Saratoga Resources statement approved; plan hearing set for Aug. 23

By Caroline Salls

Pittsburgh, July 20 – Saratoga Resources, Inc. received court approval of the disclosure statement for the joint plan of reorganization filed with its official committee of unsecured creditors, according to an order filed Wednesday with the U.S. Bankruptcy Court for the Western District of Louisiana.

The plan confirmation hearing is scheduled for Aug. 23.

Under the plan:

• A scaled-down version of the company’s business will continue operating after confirmation, with essentially all assets transferred, and claims channeled, to a litigation trust to be established under the plan.

The litigation trust will prosecute trust causes of action and distribute any net proceeds to the holders of super-priority claims, administrative expense claims and general unsecured claims;

• Plan-related funds will be distributed in accordance with a cash collateral stipulation and the plan;

• A convenience fund will be distributed to holders of convenience claims;

• If first-lien lenders, holders of convenience claims and holders of general unsecured claims vote to accept the plan, asset purchaser Energy Reserve Group II, LLC will subordinate the payment of its super-priority claim to the payment of up to $2 million in unsecured pre-bankruptcy trade debt from net litigation trust proceeds;

• Assets not transferred to the litigation trust will be retained by the reorganized Saratoga debtors;

• If holders of convenience claims and general unsecured claims vote to accept the plan, existing Saratoga stockholders will retain their equity interests in the reorganized company. If those classes reject the plan, the existing equity interests will be canceled and new equity interests will be issued to the litigation trust;

• Liens securing first-lien and second-lien claims and any other secured claims will be canceled to the extent not already canceled at the time of the sale to Energy Reserve Group II;

• First-lien noteholders will receive a credit of $10.7 million on the outstanding obligations in connection with the asset sale; and

• All second-lien claims will be treated as deficiency general unsecured claims.

Saratoga, based in Austin, Texas, is an oil and gas exploration and production company that filed for bankruptcy April 1, 2009. Its Chapter 11 case number is 09-50748.

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