The U.S. Bankruptcy Court approved Magnum Hunter Resources’ motion for entry of an order (i) approving its continuation of a surety bond program and (ii) granting related relief.
As previously reported, “The issuance of a surety bond shifts the risk of the Debtors’ non-performance or non-payment from the Debtors to a surety. Unlike an insurance policy, if a surety incurs a loss on a surety bond, it is entitled to recover the full amount of that loss from the principal. To that end, the Debtors are party to one indemnity agreement that sets forth the Sureties’ rights to recover from. The Debtors Pursuant to the Surety Indemnity Agreement, the Debtors agree to indemnify the Sureties from any loss, cost, or expense which the Sureties may incur on account of the issuance of any bonds on behalf of the Debtors. Additionally, the Surety Indemnity Agreement allows the Sureties to request collateral security from the Debtors from time to time.”
Court-filed documents continue, “The premiums for the surety bonds generally are determined on an annual basis and are paid by the Debtors when the bonds are issued and annually upon renewal. The annual premiums for the Debtors’ bonds total approximately $64,000. As of the Petition Date, the Debtors have approximately 24 surety bonds totaling $2.3 million outstanding. The surety bonds secure certain of the Debtors’ obligations related to oil and gas lease maintenance and operations.”
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