Cano Petroleum: court confirms plan of reorganization, OKs stock sale

By Lisa Kerner

Charlotte, N.C., July 17 - Cano Petroleum, Inc.'s second amended plan of reorganization was approved on Monday, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

The company's disclosure statement was approved in May.

As previously reported, Cano has entered into a stalking horse agreement to sell its stock to NBI Services, Inc. for $47.5 million. The sale proceeds will be distributed to creditors under the plan.

Treatment of creditors under Cano's plan will include:

• Holders of administrative claims, priority tax claims, royalty claims and priority non-tax claims will be paid in full in cash;

• Holders of senior secured claims will receive all of the sale proceeds and available cash, except those transferred to a liquidating trust, as well as net proceeds from the sale of other assets, funds remaining in a claims reserve, the proceeds of the sale of closing accounts receivable, any funds remaining in a liquidating trust expense reserve, all forfeited amounts in an undeliverable distribution reserve and all remaining accounts from environmental escrow funds;

• Holders of UnionBanCal Equities, Inc. (UBE) junior secured claims will receive any excess amounts if the senior secured claim distribution amounts are more than the allowed senior secured claims and the allowed senior secured claims are paid in full.

If not, holders of UBE junior secured claims will be treated as general unsecured claims.

However, if the company's creditors' committee supports and does not object to confirmation of the plan, all nine classes of general unsecured claims vote to accept the plan by the required majority and the validity, extent or priority of the junior secured lenders' liens are not challenged by the committee, a creditor or other party in interest, then these creditors' deficiency claim will be waived and not treated as a general unsecured claim;

• Holders of miscellaneous secured claims will be paid in cash or receive treatment determined by the bankruptcy court;

• Holders of general unsecured claims will receive from the liquidating trust a share of the sum of a gifted amount, plus total cash avoidance action proceeds, less the amount of an avoidance action proceeds reserve or gift reserve required to satisfy plan carve-out claims; and

• Holders of intercompany claims, preferred stock and interests will receive no distribution.

Stock sale approved

Also on Monday, the court approved Cano's $47.5 million stalking horse bid agreement with NBI Services, Inc.

The proceeds will be distributed to creditors under Cano's plan.

As previously reported, under the NBI stock purchase agreement, all existing capital stock, including Cano's common stock and series D convertible preferred stock, will be canceled and NBI Services will receive all of the outstanding capital stock of reorganized Cano in exchange for $47.5 million.

Cano received no additional bids before its bid deadline, so the company canceled the scheduled June 12 auction, according to prior court documents.

Cano, a Fort Worth-based oil and natural gas company, filed for bankruptcy on March 8. Its Chapter 11 case number is 12-31549.

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