Walnut Creek Continues Fight Against Optim's Ch. 11 Plan
Walnut Creek Mining Co. announced Wednesday it would appeal Optim Energy LLC's recently confirmed Chapter 11 plan and urged a Delaware bankruptcy judge to put the power plant operator's restructuring on hold while it takes its challenge up the legal ladder.
Walnut Creek — a Blackstone Group LP unit and Optim's self-professed largest creditor — filed notice with the bankruptcy court announcing its intent to appeal confirmation, as well as a motion asking U.S. Bankruptcy Judge Brendan L. Shannon to stay consummation of the plan until the matter can be heard in Delaware's district court.
Judge Shannon blessed Optim's plan on July 24 following a contentious two-day hearing over the objections of Walnut Creek, which argued that the debtor had tried to manipulate the plan to ensure confirmation and contends its appeal has far-reaching implications.
“The issues raised by Walnut Creek over the course of that hearing not only affect Walnut Creek's rights, they implicate important questions affecting further cases to come and bankruptcy law and policy generally,” according to the company's stay motion.
Walnut Creek argued last week that Optim, owned by Bill Gates' Cascade Investment LLC, had been "gerrymandering" claims in order to have the approval of one impaired creditor class needed to exit bankruptcy, but Judge Shannon disagreed and found the plan met applicable Chapter 11 standards.
Although Optim took more than 16 months to get its third amended plan confirmed, Walnut Creek contends the debtor is now unwilling to abide by the mandatory 14-day stay, according to the motion.
Optim is “determined to consummate the plan as soon as possible to deny Walnut Creek an opportunity to seek a stay pending appeal and to maximize the likelihood of Walnut Creek's appeal being moot,” the motion said.
A stay of the confirmation order will not prejudice Optim or Cascade, but will enable Walnut Creek to seek judicial review, the motion said.
Moreover, the stay is merited because Walnut Creek has a good chance of demonstrating on appeal that Optim improperly impaired claims to secure plan approval, according to the motion.
In light of testimony and Third Circuit precedent, “Walnut Creek will likely succeed in arguing that the third amended plan should not have been confirmed,” the motion said.
Walnut Creek, which was once a major Optim coal supplier and is asserting a disputed $190 million claim connected to the rejection of its agreement, has asked Judge Shannon to expedite consideration of its stay motion.
Texas-based Optim and several subsidiaries entered bankruptcy 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.
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.
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.
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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