Blast Energy creditor asks court to convert bankruptcy case to Chapter 7

By Caroline Salls

Pittsburgh, May 30 - Blast Energy Services, Inc. shareholder and creditor Alberta Energy Partners asked the U.S. Bankruptcy Court for the Southern District of Texas to convert Blast's Chapter 11 case to Chapter 7 bankruptcy for liquidation, according to a Tuesday court filing.

According to the motion, Blast Energy sold its only significant business operations to Laurus Master Fund, Ltd., leaving the company with a $2.1 million debt to Laurus and "with the speculative anticipation of eventual windfalls from pending lawsuits."

Alberta Energy said the case conversion is warranted because of the company's continuing losses with little chance of rehabilitation; failure to maintain appropriate insurance; unexcused failure to comply with financial reporting requirements; and failure to provide information requested by the U.S. Trustee.

In addition, Alberta Energy said the company's recently proposed debtor-in-possession financing would have priority over all other creditors except Laurus and place all other creditors further behind in hopes of receiving any distribution.

Alberta Energy also said the company's plan of reorganization would only add $3 million more in debt, ahead of all creditors' claims except those of Laurus and the Berg McAfee Cos.

If the court chooses not to convert the case, Alberta Energy asked it to appoint a Chapter 11 trustee to oversee the case.

Blast Energy, a Houston-based provider of fabricated mobile drilling rigs to the oil and natural gas sector, filed for bankruptcy on Jan. 19. Its Chapter 11 case number is 07-30424.

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