Hawkeye Energy unit second-lien agent objects to Chapter 11 plan

Lisa Kerner

Charlotte, N.C., Feb. 26 - Hawkeye Energy Holdings, LLC subsidiary Hawkeye Renewables, LLC's second-lien agent, Wilmington FSB, filed an objection to the debtors' disclosure statement and joint prepackaged chapter 11 plan, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

A hearing is scheduled for March 18.

In the filing, Wilmington FSB said "the debtors' chapter 11 filings come on the heels of a severe downturn in the ethanol business."

Corn prices have since normalized and the "debtors are well-positioned to enjoy a dramatic turnaround based on a market rebound in this commodity-driven business," the filing said.

Wilmington FSB believes the valuation supporting Hawkeye's proposed plan "hinges on stale projections" from November that overstate the price of corn and understate revenues.

"Based on this flawed valuation, the proposed plan would hand the business over to the debtors' first-lien lenders," the filing said.

In January, Wilmington FSB asked the court to appoint an official committee of unsecured creditors or an official committee of second-lien lenders.

As previously reported, under Hawkeye's pre-packaged plan:

• Holders of first-lien credit agreement claims will receive their share of $25 million in new secured term loans and new class A units;

• Holders of second-lien credit agreement claims will receive a share of new class B units if they vote to accept the plan, as well as all new class C units;

• Holders of general unsecured claims and equity interests will receive no distribution;

• Holders of priority claims will be paid in full in cash; and

• Holders of other secured claims will either be paid in full in cash, receive the collateral securing the claim or have their claims reinstated.

According to the disclosure statement, class B units will entitle holders to receive 7.5% of all distributions after holders of class A units have received a total of $435 million in distributions.

Class C units entitle holders to receive 10% of all distributions after holders of class A units have received a total of $580 million in distributions.

Hawkeye Renewables is an Iowa Falls, Iowa, manufacturer of alcohol-based fuel derived from corn. Its Chapter 11 case number is 09-14461.

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