Omega Navigation committee looks to file lawsuit tied to note claim

By Caroline Salls

Pittsburgh, Feb. 4 - Omega Navigation Enterprises, Inc.'s official committee of unsecured creditors requested court approval to file and prosecute lawsuits and potentially settle claims and causes of action against One Investment Inc. and Omega chief executive officer George Kassiotis, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee said the proposed lawsuits would challenge the extent, validity and/or amount of a One Investment note claim and a Kassiotis claim and would seek recharacterization as equity and/or equitable subordination of those claims.

The creditor group said it is also asking the court to prohibit One Investment from credit bidding its note claim in the upcoming sale of non-debtor equity interests and to require that any cash paid on account of those equity interests be paid into the court's possession pending further court order.

According to the motion, recharacterization of the One Investment note claim would benefit the Omega creditors because $5.5 million of the claim would be converted to equity from debt security. The committee said the equityholders are subordinate to the holders of allowed unsecured claims.

Committee allegations

In addition, the committee said Kassiotis and One Investment allegedly "engaged in inequitable conduct that injured creditors and conferred an unfair advantage to Kassiotis and OII."

Specifically, the committee said Kassiotis and One Investment advanced funds through the latter as a secured guarantee loan rather than an equity contribution at a time when Omega was undercapitalized, especially in light of the central equity features of the One Investment note.

"The OII note harms creditors by allowing Kassiotis and OII to step in front of unsecured creditors for recoveries in the bankruptcy case," the committee said in the motion.

The creditor group said Kassiotis and One Investment sought to preserve their equity interests in Omega at all costs, despite clear signs of deteriorating value.

"Kassiotis and OII foiled potential deals and eschewed good faith negotiations that would have resulted in substantial recoveries to unsecured creditors of 55% or more," the committee said.

Additionally, the committee said Kassiotis' and One Investment's recent efforts to freeze out competitive bidding and obtain the non-debtor interests for themselves for little to no consideration further harmed the value of Omega's remaining assets, which will result in significantly lower recoveries for unsecured creditors.

Omega Navigation is an Athens, Greece-based provider of marine transportation services. The company filed for bankruptcy on July 8, 2011 under Chapter 11 case number 11-35926.

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