Azure Midstream Partners’ interested party Wampanoag Capital filed with the U.S. Bankruptcy an objection to Debtor’s disclosure statement related to the Plan of Liquidation.
The objection asserts, “On March 15, 2017, this Court approved a sale of substantially all of the Debtors’ assets to BTA Gathering LLC for a purchase price of $189 million. Net auction proceeds are approximately $183.5 million, and the Debtors have approximately $6.8 million in cash, $6.2 million in accounts receivable, and other assets to generate additional estate value. The Debtors have stated that trade claims and priority tax claims will be paid in the ordinary course of business. As they have done historically, the Debtors continue to generate positive cash flow. Further, the Debtors are rejecting only nominal contracts and have resolved their gas gathering agreement matter with BP American Production Company. There are no cure costs for assumed contracts. Accordingly, there is at least $22.9 million of potential estate value available for junior stakeholders, before post-petition interest on the secured debt and reasonable and necessary professional fees. However, the Disclosure Statement fails to even address, yet adequately explain, how all this value evaporates under the Plan without any recoveries to unitholders, thus denying them a vote. For this reason, the Disclosure Statement should not be approved. In addition to this glaring infirmity, the Disclosure Statement also fails to include adequate information with respect to the following: why post-petition interest expenses for the secured debt are increasing on a monthly basis; why the Debtors have not sought to pay post-petition interest on the secured debt at less than the contract default rate (potentially saving over $4.5 million in estate value) and why the Debtors are agreeing to pay post-Effective Date fees and expenses of the secured lenders; why Lender Claims (Class 3) are not receiving full satisfaction of their Claims given the amount of net sale proceeds; and the methodology and legal basis underpinning the payments of purported severance obligations in excess of the $12,850 statutory cap and to insiders.”
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