Tenrgys plan draws objection from U.S. trustee; court resets hearing

By Sarah Lizee

Olympia, Wash., Jan. 19 – Tenrgys, LLC’s Chapter 11 plan of reorganization drew an objection Tuesday from Region 5 U.S. trustee David W. Asbach, according to a filing with the U.S. Bankruptcy Court for the Southern District of Mississippi.

The U.S. trustee said the plan cannot be confirmed because the release and exculpation language does not meet the standard required by Fifth Circuit law.

Asbach said that, based on a previous ruling in the bankruptcy case of Pacific Lumber Co., the third-party releases proposed in Tenrgys’ plan for the “released parties” and the “exculpated parties,” other than for the debtors, are not permitted.

The U.S. trustee said the ruling, which found that the exculpation of non-debtor plan proponents in Pacific Lumber’s plan amounted to an unlawful non-debtor third-party release, is a “binding precedent” that has not been overruled.

Asbach cited other similar rulings, including the U.S. Bankruptcy Court for the Southern District of New York’s recent ruling that overturned the company’s Chapter 11 plan based on its non-consensual non-debtor releases.

The U.S. trustee added that, to the extent a non-debtor may consent to releases and exculpations, they should be required to affirmatively opt-in to the releases.

Hearings moved

On Wednesday, the court decided to move the company’s hearings on confirmation of the plan. Now, the plan hearings will run from Feb. 9 through Feb. 11. They were previously scheduled for Jan. 26 through Jan. 28.

The deadline to file written objections to the plan is Feb. 1.

Plan terms

According to the disclosure statement, the plan provides for the reorganization of the debtors as a going concern and will significantly reduce the reorganized debtors’ long-term debt and annual interest payments, resulting in a stronger, de-levered balance sheet.

The plan provides for the satisfaction of the secured 2012 RBL facility claim through a collateral tender transaction. As partial security for the company’s debt under the 2012 RBL facility, PanAm19 Holdings, LLC holds security interests in 100% of the LLC membership interests of Telpico, LLC, which owns the company’s Colombian assets.

On the effective date, the debtors will convey to PanAm19 all of the debtors’ right, title, and interest in Telpico and the Colombian assets in full and complete satisfaction of PanAm19’s secured claim.

The plan also provides for the partial equitization and restructuring of the 2013 loan claim. On the effective date, the 2013 loan claim will be canceled, released and extinguished, and the consenting 2013 loan lender will receive payment of $500,000 in cash on the effective date, a membership interest equal to 10% of the equity in the reorganized Tenrgys, and a new $40 million floating-rate first-lien term loan with market pricing, but with an interest rate of Libor plus 650 basis points with a Libor floor of 1% if paid in cash, or Libor plus 850 bps with a Libor floor of 1% if paid in kind.

The debtors’ management may raise up to $5 million in financing in the form of an exit facility to be provided to the reorganized debtors on the effective date, for purposes that include funding payments under the plan.

The exit facility will be subordinate to the new secured term loan and any other creditors who are to receive cash payments under the plan.

Holders of other secured claims will receive payment in full in cash, the collateral securing their claims, or reinstatement of their claims.

Holders of other priority claims will receive payment in full in cash.

Holders of general unsecured claims will receive payment in full in cash or reinstatement.

TOG claims and intercompany claims will be reinstated.

Intercompany interests will remain unaltered.

Existing Tenrgys equity interests will receive their pro rata share of 100% of the reorganized equity interests, subject to dilution by the reorganized equity interests to be received by the holders of the 2013 loan claim.

Administrative claims and priority tax claims will be paid in full.

Ridgeland, Miss.-based Tenrgys operates an independent oil and natural gas business. The company filed bankruptcy on Sept. 17 under Chapter 11 case number 21-01515.

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