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PostRock committee objects to restrictive cash collateral use proposal
By Caroline Salls
Pittsburgh, May 5 – PostRock Energy Corp.’s official committee of unsecured creditors objected to the company’s proposed use of cash collateral, according to a Wednesday filing with the U.S. Bankruptcy Court for the Western District of Oklahoma.
The committee said it does not dispute that the PostRock debtors need liquidity to operate their business, and “to that end, the committee does not object to Citibank’s reasonable and customary restrictions on the debtors’ use of its cash collateral post-petition.”
However, the committee said it does object to the proposed cash collateral order in that it “not only fails to provide the debtors with sufficient liquidity to operate a fulsome [sale] process, but also unduly restricts the trustee’s and the committee’s rights (as well as the rights of other parties).”
The creditor group said the proposed order includes an unreasonable asset sale timeline, expands Citibank and the pre-bankruptcy lenders’ collateral package and inappropriately grants releases and provides indemnity in favor of Citibank, the lenders and related parties.
“The Chapter 11 cases were commenced for the sole purpose of facilitating a sale for the benefit of Citibank and the lenders,” the committee said.
“A lender wishing to avail itself of protection of the Bankruptcy Code must ‘pay the freight’ of the bankruptcy process, involving making sure that, at the very least, all post-petition claims can be satisfied.”
In addition, the committee said it has serious concerns that the proposed order would “doom any prospects for a recovery to unsecured creditors.”
PostRock, an oil and natural gas company based in Oklahoma City, filed for bankruptcy on April 1. The Chapter 11 case number is 16-11230.
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