A Delaware bankruptcy judge agreed to confirm Optim Energy LLC's Chapter 11 plan over the staunch opposition of creditor Walnut Creek Mining Co., which has argued the power plant company owned by Bill Gates' Cascade Investment LLC has tried to manipulate the plan to ensure confirmation.
After nearly two days of evidence and argument, U.S. Bankruptcy Judge Brendan L. Shannon said that Optim's overall plan, its fourth attempt, did meet the applicable Chapter 11 standards and that he disagreed with Walnut Creek's objection.
Walnut Creek had contended that Optim had “engineered” the plan to artificially impair claims in order to have the approval of one impaired creditor class needed to exit bankruptcy. But the judge noted that the previous time Optim put a plan up for confirmation it was met by another “robust objection” from Walnut Creek and the debtors went back to drawing board to try to come up with a solution.
Optim admittedly did some engineering to its plan to develop one that was workable and didn't meet a major litigation challenge, but the changes must be measured in amount and degree before concluding there was some sort of malfeasance, Judge Shannon said.
“I am not satisfied that the debtors' behavior rises to the level of sham or chicanery,” the judge said from the bench.
Judge Shannon did, however, sustain an objection from the U.S. Trustee's Office over the exculpation provisions in the plan, ruling that they can only be granted to plan fiduciaries. There were also several outstanding issues regarding liability releases that still needed to be worked out, but the judge said he would accept a proposed order under certification of counsel.
Optim's plan came under fire from Blackstone Group LP unit Walnut Creek, once a major coal supplier for the debtor that later filed a disputed $190 million rejection damages claim, which argued the debtor was “gerrymandering” claims — a process it nicknamed “claims-mandering” — in order to push it through confirmation.
Walnut Creek pointed to a nearly $200 Verizon bill in one of the subplans for an Optim subsidiary as an example, alleging the debtor was trying to push that particular plan through on the one impaired claim alone and went through a tortured method to ensure it was counted.
Optim countered that the Verizon claim has always been on its books, and that it always knew about the prepetition claim, and argued that Walnut Creek has had a long and concerted campaign to disrupt and frustrate the Chapter 11 case.
Walnut Creek has been crossing swords with Optim since the power plant company sought court protection, first trying to have the $700 million secured claim from Cascade, the debtor's parent, rescheduled as equity, a bid Judge Shannon rejected that was affirmed by the district court. Later the coal supplier's $190 million claim became a major point of contention, with Optim arguing Walnut Creek manufactured the claim in an attempt to disrupt its reorganization efforts.
Texas-based Optim and several subsidiaries filed for Chapter 11 protection in February 2014 after a drop in wholesale energy prices left the company with little cash and no ability to borrow more, according to court records.
The debtor subsequently sold its coal-fired Twin Oaks plant to a Blackstone unit for $126 million, but later abandoned its strategy to sell its gas-fired Altura Cogen and Cedar Bayou plants and instead determined to forge ahead with an amended Chapter 11 plan that would see parent and secured creditor Cascade take control of its two remaining generation facilities.
Optim is represented by Kurt A. Mayr, Mark E. Dendinger, Rachel B. Goldman and Robert G. Burns of Bracewell & Giuliani LLP and Robert J. Dehney, Eric D. Schwartz and Erin R. Fay of Morris Nichols Arsht & Tunnell LLP.
Walnut Creek is represented by Paul M. Basta, Joshua A. Sussberg, Matthew Kapitanyan and James A. Stempel of Kirkland & Ellis LLP and Michael W. Yurkewicz of Klehr Harrison Harvey Branzburg LLP.
The case is In re: Optim Energy LLC et al., case number 1:14-bk-10262, in the U.S. Bankruptcy Court for the District of Delaware.
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