Bankruptcy Judge Refuses To Enforce Company’s Waiver of Right To See...
06/14/16
In an Alert published on Tuesday, Raymond Patella examines a recent decision in In re Intervention Energy Holdings, LLC:
A secured creditor cannot be given a “golden” share that grants it the power to block the filing of a bankruptcy because such an arrangement amounts to an absolute waiver by the company of its right to seek bankruptcy relief, a Delaware bankruptcy judge has ruled.
In his June 3, 2016, decision in In re Intervention Energy Holdings, LLC, U.S. Bankruptcy Judge Kevin J. Carey held that such an absolute waiver violates public policy and is therefore invalid.
The facts of the case are straightforward. Intervention Energy Holding and Intervention Energy LLC filed voluntary Chapter 11 bankruptcy petitions on May 20, 2016, in the U.S. Bankruptcy Court for the District of Delaware. Four days later, their secured creditor EIG Energy Fund XV-A, LP, moved to dismiss the cases on the grounds that the parent debtor was not authorized to file a voluntary bankruptcy petition without EIG’s consent.
EIG’s motion pointed to an amended and restated limited liability agreement which required the approval of all members to commence a voluntary bankruptcy case.
More than four years earlier, in January 2012, the Debtors and EIG had entered into a note purchase agreement whereby EIG provided up to $200 million in senior secured notes. As of the bankruptcy filing, the principal amount outstanding under the secured notes was approximately $140 million. The notes were secured by liens on certain of the debtors’ assets.
To read Raymond’s full discussion of the court’s ruling, please visit the Fox Rothschild website.
Raymond Patella is a partner in the Financial Restructuring & Bankruptcy Practice, resident in Fox’s Atlantic City, NJ office.