Stone Energy and its ad hoc noteholder group filed with the U.S. Bankruptcy Court separate objections to the ad hoc shareholders’ committee’s motion to appoint an official committee of equity security holders.
The Company argues, “Unfortunately, however, the incontrovertible facts demonstrate no basis to conclude that there would be any recovery for existing equity absent the agreement of the Consenting Banks holding 100% of the $341,500,000 of Prepetition Banks Claims and Consenting Noteholders holding 79.7% of the $1,075,000,000 of Prepetition Notes Claims reflected in the Restructuring Support Agreement and the Plan….The appointment of an equity committee is an extraordinary remedy. Applicable case law provides that solvency is a prerequisite for the appointment of an official committee of equity holders.”
The objection continues, “Here, the movant (the ‘Ad Hoc Equity Group’) has not, and cannot, meet its heavy burden to prove that the Debtors are solvent. There is no doubt that the Debtors are insolvent. The Ad Hoc Equity Group also has not, and cannot, meet its heavy burden to prove that the Stone Board and the Debtors’ management are unable to adequately take into account the interests of equity holders….While the appointment of an equity committee is not necessarily incompatible with an expeditious confirmation, counsel for the Ad Hoc Equity Group has already informed the Court that it intends to seek ‘months’ of remarketing of the Debtors’ Appalachia business. Such delays may result in the Debtors’ losing the benefit of their hard-fought agreements in the Restructuring Support Agreement and shareholders getting no recovery in these cases.”
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