Southcross Energy Partners U.S. Trustee questions release provisions

By Caroline Salls

Pittsburgh, Oct. 21 – The U.S. Trustee overseeing Southcross Energy Partners, LP’s Chapter 11 case objected to the proposed approval of the disclosure statement for the company’s plan of reorganization, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

Acting Region 3 U.S. trustee Andrew R. Vara said in his objection that the Southcross debtors have proposed a plan under which general unsecured creditors and other subordinate creditors and interest holders will receive no distribution and are deemed to reject the plan.

Despite that treatment, Vara said Southcross wants to require these creditors and parties to file a written objection by the voting deadline to avoid granting third-party releases without consideration.

“The situation here is made even more egregious because the affected creditor or party has to obtain a copy of the plan, review the plan, and then retain counsel in order file a written objection to the release, exculpation, discharge and injunction provisions,” the objection said.

“Despite receiving no consideration such creditors and interest holders are compelled to grant releases to the debtors and a number of non-debtors.”

Vara said Southcross still has the ability at this stage of the proceedings to change the process and provide the affected creditors an “opt-in” form to ensure that only the affected creditors and parties who actually received the form, and truly consent to give third-party releases, will be deemed to provide them.

The disclosure statement hearing is scheduled for Oct. 28.

Southcross, a Dallas-based midstream services company, filed bankruptcy on April 1, 2019. The Chapter 11 case number is 19-10702.

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