D.E. Shaw Galvanic Portfolios and Nantahala Capital Management filed with the U.S. Bankruptcy Court an emergency motion to appoint an official committee of equity security holders to the C&J Energy Services proceeding.
The motion explains, “The necessity for an Equity Committee is clear. The Debtors have proposed a plan of reorganization that provides for a distribution to its equity holders, if they, as a class, accept the Plan. However, there is no fiduciary acting on behalf of the equity holders in this case that can assess the reasonableness of the proposed Plan distribution. Significantly, the equity holders were not included in the plan negotiation process….The enterprise valuation of C&J contained in the Disclosure Statement fails to reflect material information, is significantly understated, and is therefore suspect. Accordingly, an Equity Committee is needed to adequately represent the Debtor’s public shareholders.”
The motion continues, “Approval of the Debtors’ Plan is currently on a fast track. The deadline to object to the Disclosure Statement is October 27, 2016, and a hearing to approve the Disclosure Statement is set for November 1, 2016….The Movants are shareholders with relatively small equity holdings who, based on the size of their investment, cannot reasonably be expected to spend the resources necessary to fully analyze the Plan and the proposed distribution to equity holders. Moreover, the Order of the Court, dated July 21, 2016 (‘Trading Restrictions Order’), that restricts trading of C&J stock, effectively precludes any equity holder from acquiring sufficient shares in C&J to justify expending the resources necessary to fully analyze the issues related to protecting the legitimate interests of all public equity holders. As a result, the only way for Movants and similarly situated public equity holders to gain adequate representation in this case is for the Court to promptly appoint an Equity Committee.”
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