MTE lender agent Riverstone alleges violation of pledged equity vote

By Caroline Salls

Pittsburgh, Nov. 13 – MTE Holdings LLC debtor MDC Energy LLC lender agent Riverstone Credit Management, LLC filed a lawsuit against MDC Tuesday in the U.S. Bankruptcy Court for the District of Delaware, alleging violations of the terms of a pledged equity vote.

Riverstone said in its complaint that MTE borrowed in excess of $410 million under the Riverstone credit agreement. To secure its obligations to the lenders, MTE pledged its equity interest in MDC as collateral.

The agent said MTE defaulted on its credit agreement obligations, and Riverstone exercised rights to vote MTE’s equity interests in MDC under a pledged equity vote.

Riverstone said it also executed a written consent on behalf of MTE and amended the MDC LLC agreement to appoint a chief restructuring officer at MDC, appoint a five-member board at MDC and cause MTE to negotiate with an independent financial adviser regarding the provision of advisory services.

Despite the fact that these actions are permitted by the loan documents and are designed to provide independent governance and guidance for MDC from skilled energy industry professionals, Riverstone said representatives of MDC and MTE refused to recognize the agent’s actions.

In addition, Riverstone said representatives of MDC and MTE took the position that the pledged equity vote was “void ab initio” and refused to allow MDC’s new CRO to enter MDC’s premises.

Riverstone said MDC’s bankruptcy filing was allegedly authorized by resolutions signed by MTE chief executive officer Mark Siffin, but, following the pledged equity vote, only the newly constituted board of managers was authorized to take that action.

As a result, the agent said MDC’s bankruptcy filing was made “in blatant disregard of the corporate governance changes effected through the pledged equity vote.”

“Due to the substantial uncertainty and continuing harm to both the lenders and MDC caused by MDC’s failure to recognize the controls and corporate governance protections established by the agent, to the point of filing Chapter 11 proceedings without valid corporate authority, judicial intervention is required in order to confirm and enforce the validity of the pledged equity vote,” the lawsuit said.

MTE is a Midland, Tex.-based holding company. The company filed bankruptcy Oct. 22 under Chapter 11 case number 19-12269.

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