Ultra Petroleum creditors request appointment of Chapter 11 trustee

By Caroline Salls

Pittsburgh, Dec. 27 – An informal committee of Ultra Petroleum Corp.’s senior unsecured creditors asked the U.S. Bankruptcy Court for the Southern District of Texas to order the appointment of a Chapter 11 trustee to oversee the company’s bankruptcy case, according to a motion filed Dec. 23.

If the court does not order the appointment of a trustee, the committee is asking it to instead appoint independent directors.

After failing for months to engage with senior creditor committee or even the official committee of unsecured creditors appointed in the case, the senior creditors said the company proposed what purports to be a “joint” plan of reorganization plan of reorganization for all debtors, “but which instead is a vehicle to transfer value from Opco to the structurally junior creditors and equityholders of [holding company] Ultra Petroleum Corp.”

Specifically, the committee said the plan provides for the cram-down of the operating company’s funded debt claims with new notes with what a plan support agreement describes as “the least favorable terms for the Opco creditors that the law will allow.”

The committee said the plan also seeks to attack portions of the operating company funded-debt claims, including the debtholders’ rights to a make-whole payment.

“In sum, the debtors are using these Chapter 11 cases for the benefit of their equityholders and structurally junior creditors at the parent level to the detriment of their senior creditors and other parties in interest, who have been completely excluded from the plan negotiation process,” the motion said.

In addition, the committee said Ultra Petroleum is operating “with blatant conflicts of interest” that have been revealed by the terms of the support agreement and plan. Specifically, the committee said the operating company’s only board members are Michael D. Watford and Garland R. Shaw, both of whom are also officers and significant equityholders at the holding company.

“Not only do these board members stand to profit generously from the transfer of value to equity holders but, worse still, the PSA and the plan reflect that they will receive record breaking compensation in their capacities as officers of both Holdco and Opco,” the motion said.

“At the debtors’ assumed valuation of $6 billion, management stands to receive its pro rata share of 41% of the pro forma new equity issued under the plan on account of its Holdco equity ownership (as well as subscription rights to participate in a rights offering for an additional 25% of the new equity) and nearly $292.5 million under a management incentive plan.

“Opco’s senior creditors, on the other hand, are being crammed down by an ostensibly highly solvent company.”

A hearing is scheduled for Jan. 19.

Ultra Petroleum is a Houston-based independent exploration and production company. The company filed bankruptcy on April 29, 2016 under Chapter 11 case number 16-32202.

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