Register, or Login to view the article
January 18, 2022 – The Debtors filed a motion to extend the periods during which they have an exclusive right to file a Plan, and solicit acceptances thereof, through and including March 7, 2022, and May 6, 2022, respectively [Docket No. 678]. Absent the requested relief, the Plan filing and solicitation periods are scheduled to expire on January 19, 2022 and March 20, 2022, respectively. This is the Debtors' first request for exclusivity extensions.
The Debtors, who expect to close on their $220.0mn sale of assets to Repsol Oil & Gas USA, LLC ("Repsol") on January 19th, see a "potentially consensual conclusion" to their cases post-sale and believe that they "are poised to begin productively moving forward with the next stage of these Chapter 11 Cases." Not exactly brimming with the confidence and/or a sense of expediency one often see as debtors transition to a liquidation/wind-down plan post-sale.
Will they even make it to a scheduled February 17th hearing to consider the extension request?
First up is a February 3rd hearing to consider a motion to have these cases converted as soon as the Repsol sale closes; with that motion filed by creditors claiming to hold 79% of the Debtors' unsecured claims. These creditors insist that any effort to push forward with a Plan post-sale is a waste of the Debtors' time and their money (see below).
The Extension Motion
The extension motion explains, “The current Exclusive Periods do not provide the Debtors sufficient time to accomplish their objectives in these Chapter 11 Cases. Although the Debtors’ achievements and activities since the Petition Date have established the necessary foundation to advance these Chapter 11 Cases toward their exit, the Debtors desire additional time to formulate and propose a chapter 11 plan. The requested extension of the Exclusive Periods will enable the Debtors to advance these cases to a potentially consensual conclusion without the value deterioration that likely would be caused by the filing of competing plans by non-Debtor parties.”
The motion continues, “[t]he Debtors have made substantial headway to date in these Chapter 11 Cases. The Debtors used the first three months of their Chapter 11 Cases to maximize the benefits of the chapter 11 process—including stabilizing the business post-petition, pursuing rejection of burdensome contracts, achieving several critical milestones such as filing Schedules and Statements and establishing a pre-petition claims bar date, and, most significantly, running a successful auction process for the sale of substantially all of the Debtors’ assets—all to construct the framework of a successful chapter 11 plan. That framework and the results of the sale process could not have been achieved on a shorter timeline. Now that the framework is in place, however, the Debtors are poised to begin productively moving forward with the next stage of these Chapter 11 Cases, including seeking a recovery of certain assets for the benefit of the estates and negotiating a chapter 11 plan with their stakeholders.
The Debtors have only recently completed a successful marketing and auction process for the sale of substantially all of their assets. The sale is expected to close on or about January 19, 2022. Once the sale has been consummated, the Debtors will be able to turn their attention to formulating and negotiating the terms of a plan of liquidation using the proceeds generated from the sale. It will take time to conduct these discussions and develop the necessary framework for a confirmable chapter 11 plan. Granting the requested extension of the Exclusive Periods also will give the Debtors a full and fair opportunity to negotiate any amendments or revisions to a proposed plan without the distraction, cost, and delay of a competing plan process.”
Motion to Convert
On January 10th, creditors Regency Marcellus Gas Gathering, LLC (“Regency”) and ETC Aqua, LLC (“ETC Aqua”) filed a motion to have the Debtors’ Chapter 11 cases converted to cases under Chapter 7 [Docket No. 646] immediately following the closing of the Debtors' sale of substantially all of its Marcellus assets to Repsol Oil & Gas USA, LLC (still anticipated for January 19th).
Regency and ETC Aqua, who assert that they collectively hold 79% of the Debtors' remaining unsecured claims, argue that Chapter 7 (even with the cost of getting a Chapter 7 Trustee up to speed) would be less expensive than pushing forward with a Chapter 11 Plan.
The motion [Docket No. 646] states, “The Debtors have now sold all of their assets. By January 19, 2022, the anticipated sale closing date, the Debtors will have no business to operate, no material assets, no claims or causes of action to pursue, and no purpose to remain in chapter 11. Accordingly, the immediate conversion of the Debtors’ chapter 11 cases to chapter 7 of the Bankruptcy Code will best serve the interests of the Debtors’ few remaining creditors.
The Debtors’ Chief Restructuring Officer, John DiDonato, testified at the sale hearing that following the sale process, the estate will be wound down and the Debtor entities dissolved. The only other task that will remain is the preparation of taxes.
Mr. DiDonato also testified that the sale yielded $220 million in proceeds, which proceeds will be used to pay the Debtors’ secured indebtedness in full (estimated $217 million), $12.2 million of anticipated administrative expenses, and approximately $2 million of wind-down costs leaving the general unsecured class (comprised of an estimated $32.6 million in claims) with a meager $1.95 million [no, we don't understand the math either].
Upon belief, Regency and ETC Aqua are two of four remaining general unsecured creditors in these cases and collectively hold an approximate 79% of the remaining unsecured claims against the Debtors. As such, their recovery will be the most impacted by the Debtors’ actions post-closing. Consequently, the Debtors and their fiduciaries must proceed in a manner that maximizes return to them and act only in their best interests. In the absence of any justification for having these cases remain in chapter 11, and in order to preserve the funds that would otherwise be expended pursuing a liquidating plan, it would be in the best interests of the Debtors’ remaining creditors to convert these cases from chapter 11 to cases under chapter 7 of the Bankruptcy Code immediately following the closing of the sale.”
On December 29, 2021, further to the Court’s October 21st bidding procedures order [Docket No. 297] and an auction held on December 16th, the Court hearing the Rockdale Marcellus cases approved the $220.0mn sale of Debtors’ properties located in Bradford, Tioga, and Lycoming Counties, Pennsylvania and certain related assets to Repsol Oil & Gas USA, LLC (the “Purchaser”) [Docket No. 617]. The asset purchase agreement (the “APA”) governing the terms of the sale is attached to the order as Exhibit 1.
The Purchaser, a U.S. subsidiary of Spanish energy giant Repsol, has exploration and production assets in the Gulf of Mexico, the Marcellus Shale in Pennsylvania, the Eagle Ford Shale in South Texas, the North Slope in Alaska and the Trenton-Black River in New York.
Prepetition Corporate Structure
The Debtors are organized as limited liability companies under Title 3 of the Texas Business Organizations Code. RMH is owned by a group of individual and institutional investors, including members the Debtors’ senior management team, who own common units indirectly in Rockdale through an aggregator entity known as Rockdale Holdings, LLC. Tsunami Marcellus Partners, LP is the single largest equity holder in RMH, owning more than 85% of the Preferred
A Units in RMH. Rockdale is the wholly-owned subsidiary of RMH. The Debtors’ current organizational structure is as follows:
About the Debtors
According to the Debtors: “Rockdale Marcellus, LLC was formed with the acquisition of Shell’s operated Marcellus properties in Tioga, Lycoming and Bradford Counties in Pennsylvania in 2017. Rockdale Marcellus owns and operates producing wells on a contiguous acreage position of ~48k gross acres with ~100% working interest. Current production is ~110 mmcfpd as of March 2021, with over 100 future drilling locations identified in the highly productive Marcellus dry gas shale formation. Our management team brings significant expertise to evaluate and develop shale reservoirs generating both exceptional value and long term growth."
Read more Bankruptcy News