ERG Intermediate trustee objects to plan of reorganization

By Mark Reccek

Bethlehem, Pa., Oct. 16 – ERG Intermediate Holdings LLC’s trustee William T. Neary objected to the company’s first amended joint plan of reorganization, according to a Thursday filing with U.S. Bankruptcy Court for the Northern District of Texas.

Neary argued that the plan should be rejected because it offers broad releases of claims against non-debtor third parties by creditors who vote in favor of the plan.

These releases violate the Bankruptcy Code and controlling Fifth Circuit precedent and therefore, should not be approved, except as to members of the official committee of unsecured creditors, according to the trustee’s filing.

“The plan further broadly defines released parties to include not only the debtors, members of the committee, but also the DIP [debtor-in-possession] lender, DIP agent, exit facility lender, exhibit facility agent and their representatives,” the filing added.

As previously reported, treatment of creditors under the plan will include the following:

• Priority claims will be paid in full in cash;

• Pre-bankruptcy facility claims will be reinstated. Interest will be paid at a post-effective-date interest rate, and the claims will mature on the third anniversary of the plan effective date;

• Other secured claims will be reinstated or holders will be paid in full in cash or receive the collateral securing the claim;

• Holders of convenience claims will be paid in full in cash from the exempt assets trust;

• Holders of general unsecured claims will receive a share of exempt assets trust beneficial interests;

• Intercompany claims will be reinstated;

• Holders of equity interests in ERG Intermediate Holdings will receive a share of class B plan trust beneficial interests and residual net proceeds from the Nabors lawsuit after general unsecured claims are paid in full; and

• Other debtor membership interests will be reinstated for the benefit of the reorganized debtor that holds the interests.

The company’s pre-bankruptcy lenders declined a right to credit bid for ERG’s California assets but instead told the company they wanted to sponsor the plan.

Under the plan, the lenders will infuse up to $150 million of new debt capital into the company over a three-year period. During that time, ERG will continue to operate its California assets and again prepare them for sale.

Also, the plan calls for the transfer of a sale closing-related lawsuit filed against Nabors Global Holdings II, Ltd. to an exempt assets trust for the benefit of unsecured claims, free and clear of all liens.

Any claims remaining after unsecured claims have been paid in full, with interest, will be payable to indirect 100% shareholder Scott Y. Wood.

A hearing to approve the plan is scheduled for Oct. 26.

ERG is a Houston-based independent oil and gas company that filed for bankruptcy on April 30. The Chapter 11 case number is 15-31858.

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