White Stallion committee seeks reconsideration of initial DIP order

By Sarah Lizee

Olympia, Wash., Jan. 6 – White Stallion Energy, LLC’s official committee of unsecured creditors asked the U.S. Bankruptcy Court for the District of Delaware to reconsider, in part, the initial interim order authorizing the company to obtain debtor-in-possession financing, according to a motion filed Tuesday.

Specifically, the committee asked the court to eliminate the challenge period defined in the order and permit one or more challenges to be asserted at any time and without a deadline, or, alternatively, extend the challenge period by 12 months.

On Dec. 3, the debtors sought approval of a DIP financing package from its pre-bankruptcy secured parties.

Following the court’s hearing held on Dec. 4, the debtors were required to make changes to the proposed initial interim DIP order at the court’s direction, including, among other things, allowing the debtors to use $1.4 million of funding under the DIP facility, rather than the requested $3 million.

The court deferred consideration of the proposed roll-up of some of the pre-petition term loan debt, potential priming issues and the granting of full interim relief under the DIP facility until the final hearing scheduled for Dec. 21.

However, on Dec. 17, the DIP lenders terminated the DIP facility and advised the committee that they would not be proceeding with approval of the DIP facility at the Dec. 21 hearing. Subsequently, the debtors filed a proposed interim cash collateral order, which reflected an agreement between the debtors and the pre-petition ABL lender for use of cash collateral.

At the Dec. 21 hearing, the court granted the interim cash collateral order and indicated that it was not inclined to enter any additional orders with respect to the now terminated DIP facility. The court set a final hearing on the interim cash collateral order for Jan. 4.

On the morning of Jan. 4, prior to the court’s final hearing on the interim cash collateral order, the pre-petition facility lenders filed notice of their purchase of the pre-petition ABL facility and appointment of Riverstone Credit Management, LLC as successor agent to KeyBank under the facility.

As a result of these developments, the court continued the final hearing on the interim cash collateral order to Jan. 7.

“These highly unusual events warrant elimination of the challenge period in the initial interim DIP order to allow the committee to conduct a thorough investigation of all relevant issues in these cases without a restriction as to when any potential challenge needs to be commenced,” the committee said.

“The circumstances that led to the DIP facility’s termination are ripe for this committee’s investigation, an issue not taken into account and considered when this court entered the initial interim DIP order because it occurred after the entry of such order.

“Moreover, assertions have been made to the court, both orally and through written pleadings, which raise important questions about the pre-petition conduct of the term loan lenders that need to be investigated by the committee.”

The committee said its efforts to fulfill its fiduciary duties must not be “stymied by an artificially short challenge period that was bargained for prior to the committee’s existence and as part of a DIP financing deal that no longer exists.”

White Stallion Energy is a coal mining company based in Evansville, Ind. The company filed bankruptcy on Dec. 2 under Chapter 11 case number 20-13037.

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