SandRidge Energy’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court an objection to the Debtors’ emergency motion for interim and final orders authorizing (i) post-petition use of cash collateral, (ii) granting adequate protection to pre-petition lenders and (iii) scheduling a final hearing.
The committee asserts, “First, the Adequate Protection package is overreaching. The Cash Collateral Order improperly seeks to impose liens and superpriority claims on avoidance action proceeds, which courts have held exist for the benefit of unsecured creditors. In addition, certain aspects of the Adequate Protection payments to the Secured Parties are excessive, as they provide for (i) the potential accrual of postpetition interest for the First Lien Lenders at the default rate without appropriately reserving the rights of parties to contest such accrual, and (ii) the payment of professional fees for an ad hoc group of noteholders purporting to act in the interests of their Unsecured Senior Notes holdings….Second, the proposed Cash Collateral Order contains inappropriate waivers that will, under the facts and circumstances of these cases significantly harm unsecured creditors.”
The objection continues, “Specifically, the Cash Collateral Order includes waivers of the (i) Debtors’ right to surcharge collateral, (ii) ‘equities of the case’ exception and (iii) equitable doctrine of marshalling….Third, the proposed Cash Collateral Order attempts to insulate the Secured Parties from potential litigation, by, among other things, (i) providing for an unnecessarily short investigation period, (ii) providing a woefully insufficient cap on Committee fees and expenses relating to the investigation of potential claims and (iii) prohibiting the use of Cash Collateral for the prosecution of claims against the Secured Parties. Fourth, certain of the Termination Events contained in the Cash Collateral Order serve to unnecessarily prejudice the ability of the Committee to assert claims against the Secured Parties without risking the Debtors’ continued use of Cash Collateral. Moreover, the proposed Cash Collateral Order is inappropriately cross-defaulted with the RSA – a blatant attempt by the Secured Parties to exercise excessive control over these chapter 11 cases.”
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