Mahalo Energy (USA) files for bankruptcy amid lack of proposals

By Caroline Salls

Pittsburgh, May 21 - Mahalo Energy Ltd.'s wholly owned subsidiary Mahalo Energy (USA) Inc. filed for Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the Eastern District of Oklahoma, according to a company news release.

Mahalo said the company's management has been exploring strategic alternatives since the fall of 2008 and has had discussions with a number of interested parties.

However, no satisfactory offers or proposals have been made to date, and management has concluded that no transaction is likely to take place in the immediate future.

According to the release, the filing will allow Mahalo to remain in possession and control of its property and carry on its business, as well as to continue evaluating its strategic alternatives, including a sale of Mahalo or its assets.

In connection with the filing, the company has obtained a commitment from Ableco Finance, LLC for $2 million in debtor-in-possession financing that will allow Mahalo to meet current operating needs, including wages, benefits and other operating expenses.

The terms of the DIP facility had not yet been filed late Thursday evening.

According to court documents, Mahalo Energy (USA) has $10 million to $50 million in assets and $100 million to $500 million in debt.

The company's largest unsecured creditor is Williams Production Mid Con Co. of Tulsa, Okla., with a $3.95 million trade claim.

Mahalo is a Calgary-based junior, unconventional natural gas producer, focusing on the development and production of coal bed methane and shale gas prospects. Mahalo Energy (USA) is based in Tulsa, Okla. Its Chapter 11 case number is 09-80795.

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