MTE lender agent seeks appointment of Chapter 11 trustee or examiner

By Caroline Salls

Pittsburgh, Nov. 13 – MTE Holdings LLC lender agent Natixis, New York Branch is asking the U.S. Bankruptcy Court for the District of Delaware to appoint a Chapter 11 trustee to oversee the bankruptcy case of some of the MTE debtors or an examiner, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

Specifically, Natixis said a trustee or an examiner should be appointed for the cases of MDC Energy LLC, for itself and on behalf of wholly owned MDC subsidiary debtors Ward I, LLC and MDC Reeves Energy LLC.

“The immediate appointment of a Chapter 11 trustee is critical to preserve the value of MDC by stopping the ongoing mismanagement, stabilizing the insecurity of MDC’s trade creditors and putting MDC’s financial affairs in order so that these bankruptcy proceedings can proceed efficiently and the creditors can avoid the acrimonious disputes that are certain to worsen without confidence in the accuracy of the financial and operational data essential to charting a path forward,” the motion said.

Natixis said its experience with MDC “has been plagued by a near complete lack of transparency and MDC’s obstinate refusal to meet its contractual obligations.”

Specifically, the agent said MDC violated its credit agreement obligations to provide financial reporting requirements, including certifications that it remained in compliance with the financial covenants meant to protect the agent against unauthorized debt increases and impairment of the extensive collateral package securing the $60 million underlying loan.

Natixis said the information it has gleaned from bank statement “illustrates a pattern of gross mismanagement.”

Specifically, the agent said MDC’s finances reveal intercompany transfers in violation of multiple provisions of the credit agreement, including improper distributions to MDC’s parent company, inexplicable transfers to non-debtor affiliates and large monthly payments to two non-debtor affiliates for purported management services “that seem illusory.”

“MDC’s gross mismanagement is also evident from the meteoric rise in MDC’s aging accounts payable and trade creditor liens – some 85 trade creditors, who provide services without which MDC is incapable of operating, have filed over 615 liens totaling in excess of $110 million, nearly all of which has been amassed in the past six months,” the motion said.

In addition, Natixis said conflicts of interest exist throughout the debtors and non-debtor affiliates’ management.

“Absent the requested relief, existing MDC management will continue to mismanage the business, which threatens the viability of the company’s real enterprise value – its oil and gas reserves,” Natixis said.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.