Blast Energy's creditors committee objects to plan of reorganization

By Jennifer Lanning Drey

Portland, Ore., Nov. 21 - Blast Energy Services, Inc.'s official committee of unsecured creditors objected to the company's plan of reorganization due to uncertainty related to the funding on which the plan is predicated, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

According to the filing, the feasibility of the plan is based on Blast successfully raising $3 million in a private placement of equity; however, Blast is still trying to obtain the necessary plan funding. The committee does not believe that Blast has any cash on hand.

Without the plan funding, Blast will not be able to satisfy claims intended to be paid in full under the plan, the committee said in the filing.

Creditor treatment

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

• Holders of priority claims will recover the full amount of their claim in cash;

• Laurus Master Fund Ltd. will receive a transfer of rigs in accordance with a settlement agreement and a $2.1 million payment in satisfaction of its secured claim;

• Holders of Berg McAfee Cos. LLC claims will receive a $2.1 million note, with interest to be paid in new common stock in the reorganized company;

• Holders of secured claims will receive either full payment in cash, the collateral securing the claim or a note secured by the claim that provides for deferred cash payments,

If the claim is not paid in full through these methods, the unpaid amount will become a deficiency claim to be treated as a general unsecured claim;

• Holders of Blast and Eagle convenience claims, which is a claim for less than $10,000 or a claim that is reduced by the holder to less than $10,000, will receive 75% of their claim in cash;

• Holders of Eagle and Blast unsecured claims will receive cash equal to 35% of the claim and an Eagle or Blast junior secured note equal to the other 65% of the claim;

• Second Bridge LLC's $900,000 shares of Blast common stock will be bought by Blast on the plan effective date for $900 and returned to treasury; and

• Holders of directors' unsecured claims will have their claims converted to new Blast common stock at a rate of $0.20 per share.

Reorganized Blast will be authorized to issue up to 180 million shares of new common stock and 20 million shares of convertible preferred stock.

The convertible preferred stock will bear interest at 8%, payable at the company's option in either cash or in new common stock at a rate of $0.50 per share.

The conversion price will be $0.50 per share.

The preferred stock will automatically convert when the share price exceeds $3.00 per share at an average volume of 50,000 shares/day for more than 20 consecutive trading days.

Both the Blast and Eagle junior notes will have a five-year term and will bear interest at 8%.

Blast's plan confirmation hearing is scheduled for Nov. 28.

Blast Energy, a Houston-based provider of fabricated mobile drilling rigs to the oil and natural gas sector, filed for bankruptcy on Jan. 19, 2007. Its Chapter 11 case number is 07-30424.

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