Metro Fuel trustee objects to settlement, seeks Chapter 7 conversion

By Kali Hays

New York, March 24 - Metro Fuel Oil Corp. U.S. Trustee Michael K. Harrington objected to the company's proposed global settlement and requested that Metro Fuel's Chapter 11 case be converted to Chapter 7, according to two Monday filings with the U.S. Bankruptcy Court for the Eastern District of New York.

Harrington objected to the settlement because it "divests the debtors' principals of possession and control of the estates and places the control of the Chapter 11 cases in the hands of an estate representative who takes direction of a steering committee of creditors," the objection motion stated.

As previously reported, the proposed settlement allows the parties to receive a $17.5 million cash contribution from the company's principals, Paul J. Pullo Jr. and Gene V. Pullo. Of that amount, Metro Fuel said it will receive $2.7 million.

The settlement also includes a resolution of intercreditor claims over the allocation of liquid assets, including sale proceeds, in the amount of $16 million.

Harrington claims the settlement would "improperly circumvent" bankruptcy law as the estate representative and the steering committee will be given authority over the estate and the continuation of the Chapter 11 case.

Harrington's basis for conversion to Chapter 7 rests on the assertion that Metro Fuel is "administratively insolvent" with operating reports that "demonstrate continuing losses to these estates" and said "as the debtors have ceased operations and do not appear to be able to confirm a plan, there is no likelihood of rehabilitation," the conversion motion stated.

Harrington further claimed "there are substantial assets available in this case, including cash and valuable causes of action, and conversion provides an avenue for an independent trustee to liquidate and distribute assets and litigate or resolve causes of action for the benefit of creditors."

A hearing is scheduled for March 31.

Metro Fuel is a Brooklyn, N.Y.-based energy company that supplies bioheat, biodiesel, heating oil, central air conditioning units, ultra low sulfur diesel fuel, natural gas and gasoline throughout the New York City metropolitan area and Long Island. The company filed for bankruptcy on Sept. 27, 2012 under Chapter 11 case number 12-46913.

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