Burro Sand committee wants bankruptcy case converted to Chapter 7

By Sarah Lizee

Olympia, Wash., Dec. 12 – Aequor Mgt LLC’s (Burro Sand) official committee of unsecured creditors is seeking conversion of the company’s Chapter 11 bankruptcy case to Chapter 7, according to a motion filed Tuesday with the U.S. Bankruptcy Court for the Eastern District of Texas.

“These cases have lingered for nearly a year with very little progress and the estates are administratively insolvent,” the committee said in the motion.

“There is simply nothing to reorganize and confirming the debtors’ proposed plan serves no purpose other than to release potential claims against insiders and recipients of fraudulent transfers or converted property.”

The committee said that it has identified transactions and transfers that give rise to colorable claims for fraudulent transfer, breach of fiduciary duty and conversion.

The group said the debtor’s valuable mining equipment was taken by insiders prepetition and moved to another mine, with the debtor receiving no consideration in return. The committee said insider entities have used the equipment to successfully operate another mine for years.

In addition, the debtor was forced to be the borrower on a $22 million loan from Castlelake, even though it received no benefit from the loan, the committee said.

The loan was allowed to accrue default interest and fees for years and Castlelake’s alleged claim is now more than double the original principal amount, the committee added.

“The debtors’ proposed plan is based on a settlement between the debtors, the insiders, and Castlelake,” the group said.

“That settlement would release all of the claims that are described above and all claims against the very insiders who repeatedly caused harm to Aequor MGT.”

The committee said it was excluded from the settlement negotiations.

“Importantly, the court is not required to accept a self-serving settlement that provides nothing to unsecured creditors,” the committee said.

“Instead, conversion of these cases to Chapter 7 will preserve the causes of action and allow them to be pursued by an independent trustee, who will be incentivized to obtain the maximum recovery for the estates.”

The company’s disclosure statement hearing was scheduled for Dec. 13.

Tyler, Tex.-based Burro Sand is a frac sand mining and processing plant. The company filed bankruptcy on Jan. 5, 2023 under Chapter 11 case number 23-60010.

© 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.