Judge OK's Trico Marine liquidation plan; cash collateral expires

By Jim Witters

Wilmington, Del., Aug. 2 - Trico Marine Services Inc. received approval for its liquidation plan Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

Debtors attorney John Mitchell assured the court that changes made to the plan to incorporate settlements with Tennenbaum DIP Opportunity Fund LLC and Tennenbaum Opportunities Partners V LLP and with Arrowgrass Master Fund Ltd. would in no way cause "a material negative impact on the timing, and/or amount of the consideration projected to be distributed to the various classes of creditors as set forth and estimated in the original plan and disclosure."

Under an agreement reached July 28, Tennenbaum is to receive $20 million, allocated between creditor classes five and six, with two-thirds being funded from class five funds and one-third from class six. Tennenbaum also will receive a $250,000 cash payment on the plan's effective date.

Arrowgrass will receive $500,000 as an administrative claim and asked Tuesday that the claim be paid in cash on the plan's effective date. Arrowgrass also has the right to file a 503(b) claim of up to $150,000, which the debtors will not oppose.

The debtors' cash collateral facility expired July 31, but was not renewed Aug. 2 because Mitchell said the debtors expect no need for cash disbursements before the plan effective date.

Under the plan, an advisory committee will include three representatives, one each appointed by the 8 1/8% notes indenture trustee, the creditors' committee and, collectively, the 8 1/8% notes indenture trustee, the 3% unsecured debentures indenture trustee and the creditors' committee.

Two objections raised during Tuesday's hearing came from U.S. Bankruptcy trustee David Buchbinder and from Fred Barakat, who represents creditor Stephen Jennings.

Barakat and his client claim that 30 days before the bankruptcy filing, the debtors sold assets for $900,000 to a non-debtor subsidiary in west Africa. Barakat said it was a fraudulent transaction because the debtors never collected the $900,000 and did not report it in the bankruptcy proceedings.

Robert J. Dehney, attorney for the debtors, said everything Barakat claimed is untrue. He said no fraud was involved, the information about the $900,000 was not asked for in the required bankruptcy filings and the court previously overruled the Jennings objection.

Judge Brendan L. Shannon overruled the objection, saying the plan administrator and the plan advisory committee could consider pursuing litigation relating to the transaction.

Buchbinder objected to language in the plan that he believed provided the debtors with a discharge, which they are not entitled to as a liquidating company.

Dehney and Mitchell agreed to include language in the plan delineating that the debtors were receiving no discharge of claims by those creditors who did not vote for the plan.

Hal Michael Clyde told the court he represents some debtor officers and directors who are involved in litigation with Tennenbaum in Texas. He said he filed a motion to move those proceedings to Shannon's court.

Mitchell said the wind-down budget may fall $1 million to $2 million short of expected expenses. But deferring some payments for professional services until after cash flow begins after the effective date could eliminate the shortfall. He also said the plan allows for the sale of securities in the non-debtor operating subsidiaries to fund the shortfall.

Creditor treatment

Under the plan, treatment of creditors includes:

• Holders of administrative claims and priority claims will be paid in full in cash;

• U.S. credit facility claims and debtor-in-possession facility claims were paid in full before the amended plan was filed, so the company will not make any distribution for these claims under the plan;

• Holders of 8 1/8% notes secured claims will be paid in full in cash. Trico said operating company equity and warrants will not be monetized to satisfy the notes claims unless they have not been paid in full one year from the plan effective date;

• Holders of other secured claims will either be paid in full in cash, have their claims reinstated or receive the collateral securing the claims;

• Holders of general unsecured claims will receive a share of $250,000 in cash. Under the original plan, these creditors were slated to receive a share of available assets, and convenience claimants would have received a share of $250,000. There is no convenience claims class in the amended plan;

• Holders of qualified investor claims and 8 1/8% notes deficiency claims will receive a share of distribution assets; and

• Holders of inter-company claims, inter-company interests and old TMS equity will receive no distribution.

Trico, a marine services company based in the Woodlands, Texas, filed for bankruptcy on Aug. 25, 2010. The Chapter 11 case number is 10-12653.

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