American Eagle Energy noteholders seek reconsideration of USG deal

By Caroline Salls

Pittsburgh, June 28 – An informal group of American Eagle Energy Corp. noteholders asked the U.S. Bankruptcy Court for the District of Colorado to reconsider an order denying approval of the company’s settlement with USG entities, according to a motion filed Monday.

The informal noteholder group is comprised of Bennett Management Corp., Aristeia Capital, LLC, Kayne Anderson Capital Advisors, LP and Northeast Investors Trust.

The noteholder group said the court found that the sales proceeds that would remain in escrow after completion of the settlement were not sufficient to adequately protect the interest of non-settling well-lien claimants.

However, the noteholders said the well-lien claimants, through their counsel, misrepresented at the hearing both the amount of their claims in these cases and applicable law governing their ability to recover interest and attorney’s fees on those claims.

“The ad hoc noteholders’ group believes that these misrepresentations led to insufficient consideration being given to both uncontroverted testimony on the relative lack of value of the assets that secure many of the alleged claims of the non-settling well-lien claimants and the extent to which the amended complaint includes duplicate, released or paid claims,” the noteholders said in the reconsideration motion.

“Correcting the misrepresentations made at the hearing and reconsidering the evidence on the value of assets securing the non-settling well-lien claimants’ claims compels the conclusion that the $12.1 million in reserved sales proceeds remaining after consummation of the USG settlement adequately protects the interests of the non-settling well-lien claimants.”

Settlement background

As previously reported, American Eagle requested approval of the settlement with 11% senior secured notes trustee U.S. Bank NA, the informal noteholders group and USG parties USG Properties Bakken I, LLC and NextEra Energy Gas Producing.

American Eagle said in the settlement motion that the proceeds of its $36.75 million asset sale to Resource Energy Can-Am LLC are being held in escrow pending the resolution of competing claims against the proceeds, including those pending in a carry agreement lien and claim priority lawsuit filed by the USG parties.

In their lawsuit, the USG parties are seeking a ruling that their carry agreement claim is secured by liens granted under joint operating agreements executed by predecessors-in-interest to American Eagle and USG in 2011 and that the carry agreement claim is senior in priority to the senior secured notes claim.

Under the proposed settlement, American Eagle would pay USG $3.2 million from the sale proceeds and would distribute $19.84 million from the sale proceeds to the trustee, which the trustee will apply toward reduction of the senior secured notes claim.

In addition, American Eagle would assign to USG $476,295 of an account receivable and related proceeds held by the company for amounts owed by Power Energy Partners LP and its affiliates for hydrocarbons received from the American Eagle debtors but not paid for by Power Energy.

American Eagle is a Littleton, Colo.-based independent oil and gas acquisition, exploration and development company. The company filed for bankruptcy on May 8, 2015 under Chapter 11 case number 15-15073.

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