The judge overseeing proceedings of Intervention Energy‘s bankruptcy, overturned lender EIG Global Energy Partner’s bid to dismiss the court case.
Intervention filed for bankruptcy protection in May 2016 and was immediately met with opposition from EIG, which called for the case to be dismissed.
EIG argued that Intervention didn’t have the authority to file for bankruptcy without its approval as such an action required shareholder approval.
As part of the deal, Intervention agreed to secure 100% shareholder approval in order to file for bankruptcy. However, EIG said it didn’t consent to the company’s bankruptcy filing.
Intervention and EIG met in court last week, both warning that a ruling could have a broad impact beyond their specific dispute.
Intervention’s attorney said if the judge agreed to dismiss the case, this decision would allow other lenders to demand such consent rights and could negatively impact the companies’ ability to restructure outside of court.
Meanwhile, EIG argued a decision in favor of Intervention would essentially take away a company’s rights under state law to enter contracts.
A hearing would be held on Tuesday to discuss the judge’s decision to deny the dismissal as well as to proceed with other requests designed to keep Intervention’s bankruptcy moving forward.
EIG holds about $140m of Intervention’s bond debt, which stems from a $200m financing deal reached in 2012 to finance well developments.
North Dakota-based shale gas company Intervention Energy Holdings LLC filed for bankruptcy protection on Friday amid a brewing battle with lender EIG Global Energy Partners.
According to company chief executive and founder, John Zimmerman, EIG was a “cooperative partner” for the majority of its time as Intervention Energy’s lender but its position had clearly changed once they had decided to build up their competing platform.”
Intervention had a $200m senior secured note from EIG in 2012, which it used to finance well development costs. As per court documents, Intervention owed EIG about $140m.
The relationship between the two began to strain when Intervention defaulted on its debt in June 2015. The parties entered into a forbearance agreement post the default, during which an equity infusion was sought and an investment bank, Evercore, was hired to look at the sale of the company.
During the sale process, Intervention managed to attract three bidders, all of which were rejected by EIG, in March 2016, as EIG intended to let the forbearance agreement expire.
Post-expiry of the forbearance agreement, a foreclosure could have led to EIG seizing the company’s assets and selling it to another company it was in talks with.
Before filing for bankruptcy, the company had reinvested $76m free cash back into the company and EIG had made an equity infusion of about $32m.
U.S.-based oil explorer Pacific Exploration & Production Corp stated that its board was in favor of a restructuring proposal submitted by Catalyst Capital Group over a bid by EIG Global Energy Partners.
Previously, EIG Global had submitted a proposal in early May 2016 to provide $250m debtor-in-possession (DIP) financing to Pacific Exploration and sponsor the company’s restructuring.
Catalyst Capital had also agreed to provide $250m in DIP financing in April 2019 to take a 29.3 percent stake in the restructured company.