Trico Marine liquidation delayed by Tennenbaum guaranties claim

By Jim Witters

Wilmington, Del., July 28 - A tentative deal reached late Thursday could lead to confirmation of Trico Marine Services Inc.'s liquidation plan in the Aug. 1 week.

The plan got derailed at the outset of a Thursday confirmation hearing in U.S. Bankruptcy Court for the District of Delaware when representatives of Tennenbaum DIP Opportunity Fund LLC and Tennenbaum Opportunities Partners V LLP claimed they were due an additional $27 million in guaranties.

Tennenbaum has already received about $17 million in equity in the restructured non-debtor operating subsidiaries of Trico Marine.

Debtor's counsel Kevin J. Burke contended Tennenbaum had waived its rights to the guaranties under a prior agreement.

He said it is clear from the court documents that Tennenbaum "never claimed they had claims against the debtor they were preserving. Now they are asserting these guaranty claims."

Tennenbaum attorney Robert A. Klyman told the court there is no document signed by Tennenbaum representatives that waives rights to the guaranties.

"Tennenbaum did not object to the settlement in the 9019 order because it didn't have anything to do with us," Klyman said.

Judge Brendan L. Shannon recessed the hearing about 11:45 a.m. ET to allow the parties to discuss settlement options. Throughout the day, four groups huddled in the courthouse halls, discussing terms in hushed tones. After several status updates during the afternoon, the parties announced a tentative deal about 5:30 p.m. ET.

"Peace has indeed broken out, at least for most of the parties," said debtors counsel Joel H. Levitin.

Tennenbaum's $20 million guaranty claim will be allocated between creditor classes five and six, with two-thirds being funded from class five funds and one-third from class six. Levitin said class six recovery is roughly 10%, while class five is roughly 5%.

Tennenbaum keeps the stock it already received.

In addition, the debtors will pay Tennenbaum's attorney fees of $250,000.

Arrowgrass Master Fund Ltd. will receive $500,000 as an administrative claim as part of the settlement. And the debtors will not oppose Arrowgrass if it pursues an additional $150,000 as a 503(b) claim.

As part of the settlement, Tennenbaum is waiving all additional claims, except those against third-party, non-debtors.

Levitin said all parties except the creditors committee have approved the detail. David J. Mark, counsel for the creditors committee said he would recommend approval of the settlement.

If the creditors committee does not support the settlement, Levitin said, the debtors will modify the liquidation plan to incorporate the settlement terms and ask judge Shannon to approve the plan.

Judge Shannon scheduled a hearing for 10 a.m. ET on Tuesday to consider the final agreement.

Creditor treatment

Treatment of creditors under the liquidation includes:

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

• U.S. credit facility claims and debtor-in-possession facility claims were paid in full before the amended plan was filed, so the company will not make any distribution for these claims under the plan.

• Holders of 8 1/8% notes secured claims will be paid in full in cash. Trico said operating company equity and warrants will not be monetized to satisfy the notes claims unless they have not been paid in full one year from the plan effective date.

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

• Holders of general unsecured claims will receive a share of $250,000 in cash. Under the original plan, these creditors were slated to receive a share of available assets, and convenience claimants would have received a share of $250,000. There is no convenience claims class in the amended plan;

• Holders of qualified investor claims and 8 1/8% notes deficiency claims will receive a share of distribution assets;

• Holders of inter-company claims, inter-company interests and old TMS equity will receive no distribution.

Trico, a marine services company based in the Woodlands, Texas, filed for bankruptcy on Aug. 25, 2010. The Chapter 11 case number is 10-12653.

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