Ryckman enters new plan sponsor deal; confirmation hearing adjourned

By Caroline Salls

Pittsburgh, Nov. 30 – Ryckman Creek Resources, LLC requested court approval of bid protections to be paid in connection with a proposed Chapter 11 plan sponsorship agreement with Sandton Uinta Storage, LLC, according to a motion filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Ryckman filed a fourth amended plan of reorganization on Nov. 13 based on a transaction under which 31 Midstream, LLC would purchase 80% of the equity in reorganized Ryckman.

However, following court approval of the disclosure statement related to the 31 Midstream-sponsored plan, Ryckman said it received an unsolicited alternative proposal from Sandton for the purchase of 80% of the equity in the reorganized company.

“The debtors determined that the Sandton proposal presented a superior alternative to the 31 Midstream transaction,” the motion said.

As a result, Ryckman entered into a plan sponsorship agreement with Sandton.

Under the new transaction, Sandton will acquire 80% of the equity interests in exchange for $6.2 million in cash and a $10 million note.

The plan sponsor cash consideration will be used by Ryckman to pay pre-bankruptcy administrative expenses, cure costs and other priority claims.

The remaining 20% of the equity interests will be distributed to a liquidating trust for distribution to incumbent stakeholders.

In addition, Ryckman said Sandton will provide at least $10 million of additional capital for capital expenditures and working capital between the plan effective date and the first anniversary thereof, as well as an incremental $5 million in funding for operational and capital expenditures or a lesser amount sufficient to achieve 16 billion cubic feet of facility capacity, between the first and second anniversaries of the effective date.

Sandton will receive 100% of all distributions of reorganized Ryckman until it has received the return of the cash consideration and has achieved the higher of 15% annual return on the cash consideration nor distributions equal to 200% of the cash consideration.

Subject to court approval, Ryckman said Sandton will be entitled to an expense reimbursement equal to the lesser of the sum of all reasonable, out-of-pocket, documented fees and expenses paid to third parties in connection with the negotiation and preparation of the sponsorship agreement and $250,000 and an additional $250,000 fee upon closing of an alternative transaction.

In addition, Ryckman said in a notice filed Thursday that the plan confirmation hearing has been adjourned to Dec. 15 from Dec. 6.

Ryckman Creek is a Houston-based gas storage services company. It operates as a subsidiary of Peregrine Midstream Partners, LLC. Ryckman filed for reorganization under Chapter 11 on Feb. 2, 2016. The case number is 16-10292.

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