ERP Iron Ore U.S. Trustee seeks conversion following plan withdrawal

By Caroline Salls

Pittsburgh, Nov. 5 – The U.S. Trustee overseeing ERP Iron Ore, LLC’s Chapter 11 case asked the U.S. Bankruptcy Court for the District of Minnesota to either convert the case to Chapter 7 or dismiss it, according to a motion filed Friday.

U.S. Trustee James L. Snyder said in the motion that “conversion to Chapter 7 is the better alternative because it will allow a Chapter 7 trustee to review all transactions undertaken by the debtor and will further allow for the independent resolution of lien disputes and provide for the independent distribution of any remaining funds to creditors.”

Snyder said in his motion that ERP Iron Ore sought approval for an additional $200,000 in debtor-in-possession financing on Oct. 10 because it failed to meet the milestones set in the previous DIP financing order and also because there were unanticipated delays in its asset sale process.

The hearing on approval of the additional financing was adjourned indefinitely by the court on Oct. 24.

In addition, the U.S. Trustee said ERP Iron Ore withdrew its plan of liquidation on Oct. 17 because the plan sponsors had withdrawn their support.

Snyder said the court also raised concerns at an Oct. 24 hearing “that the entire case appeared to be for the benefit of secured creditors only, with no remaining value to the estate, yet it appeared that the costs are being borne by unsecured creditors. The U.S. Trustee fully concurs with this assessment.”

“The debtor has no real business operations and instead is engaged in a liquidation that will not benefit the bankruptcy estate or its creditors,” Snyder said in his motion.

“The process undertaken by the debtor to effectuate the liquidation of assets has been extraordinarily expensive and it has now become clear that the debtor’s liquidation process will not generate any meaningful added recovery for the benefit of creditors.

“As a result, there has been an ongoing loss to and diminution of the estate and an absence of a likelihood of rehabilitation.”

A hearing is scheduled for Nov. 27.

ERP is based in Grand Rapids, Minn. An involuntary case against it was converted to a voluntary case on July 17. The Chapter 11 case number is 18-50378.

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