MTE: Court denies Arena affiliate’s motion seeking enforcement of order

By Sarah Lizee

Olympia, Wash., Aug. 18 – The backup bidder for MTE Holdings LLC’s assets had its motion seeking enforcement of the bid procedures order denied by the U.S. Bankruptcy Court for the District of Delaware, according to an order filed Wednesday.

Chato Energy, LLC, an affiliate of Arena Investors, LP, was named backup bidder following an auction for substantially all of the company’s assets in March. Riverstone Credit Management, LLC was named winning bidder.

Under the bid procedures, both the winning bidder and the backup bidder were required to increase the deposits that they had made to 10% of the cash portion of their final bid.

Riverstone refused to increase its deposit as the order required. Chato then filed the motion to enforce the bid procedures order. Chato requested to be declared the winning bidder or to recover damages against the estate on account of losses it claims to have suffered that it says are traceable to the alleged violations of the bid procedures order.

However, the court said in a memorandum that the bid procedures order expressly gives the debtor the right to waive the strict enforcement of the order’s terms.

“That is what the debtor has done,” the court said.

Chato also said that the winning bidder was never a “qualified bidder” and thus was not entitled to participate in the auction in the first place.

“That argument is unsuccessful. At least in the first instance, the question of which bidders are qualified is left, under the bid procedures order, to the discretion of the debtor, in consultation with its key constituencies,” the court said.

“Nothing in the testimony that the backup bidder proffered provides any reason to question the parties’ judgment in that regard.”

The court also said that Chato’s argument that it is entitled to damages on account of statements made at the auction by the agent bank under a credit facility also fails.

“Even if the statements by the agent were inconsistent with the order ... a violation of the order by the agent would give rise to a claim by an injured party against the agent,” the court said.

“The backup bidder is incorrect to argue that such a violation by the agent would give rise to an administrative claim against the estate, which is the only relief the backup bidder seeks on account of the alleged violation.”

MTE is a Midland, Tex.-based holding company. The company filed bankruptcy on Oct. 22, 2019 under Chapter 11 case number 19-12269.

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