A Delaware bankruptcy judge declined Monday to put the Chapter 11 plan for power plant company Optim Energy LLC, owned by Bill Gates' Cascade Investment LLC, on hold while self-professed largest creditor Walnut Creek Mining Co appeals confirmation of a reorganization it says includes gerrymandered claims.
In a brief order, U.S. Bankruptcy Judge Brendan Shannon ruled that Walnut Creek, a unit of Blackstone Group LP, hadn’t convinced him the challenge was strong enough to warrant staying Optim’s Chapter 11 plan while the appeal goes through the District Court in Delaware, in part because the debtor’s former coal supplier hadn’t shown it has standing to press the issue.
“Movant has not demonstrated a likelihood of success on the merits of the appeal because, inter alia, it appears to the court movant lacks standing to appeal the confirmation order,” the order said.
Walnut Creek, which has been at near-constant odds with Optim since the bankruptcy was filed in February 2014, had argued that the power plant company did some claims gerrymandering in its Chapter 11 plan in order to make it appear there was an impaired creditor class, whose approval it needed to exit bankruptcy.
Judge Shannon disagreed and confirmed the reorganization strategy after a contentious two-day hearing in July, during which the issue of Walnut Creek’s standing came up briefly during oral argument.
Optim had argued Walnut Creek was on shaky standing grounds because the portion of the reorganization strategy it was focused on was a subplan of one of the debtor’s subsidiaries, where the ex-coal supplier didn’t have a listed claim, and Judge Shannon made little comment on the matter other than that he was interested in hearing the arguments.
Regarding the stay bid, which would halt Optim’s reorganization efforts, Walnut Creek argued that it had a good chance of demonstrating that the Chapter 11 plan, its fourth version of a bankruptcy exit strategy, should have never been confirmed because of what it says were improperly or artificially impaired creditors in the mix.
The company had a prepetition claim against Optim and later lodged a $190 million rejection damages claim stemming from the power plant company’s scrapping of its contract, a claim Optim argued was simply an attempt to disrupt its reorganization efforts.
Representatives for the sides did not immediately respond to requests for comment Tuesday.
Walnut Creek lodged its appeal of the confirmation order July 30, but the matter has not been assigned to a district court judge, according to court records.
The coal supplier had brought a challenge up the legal ladder in the case before, challenging Judge Shannon’s rejection of its bid to have the $700 million secured claim from Cascade rescheduled as equity.
U.S. District Judge Leonard P. Stark affirmed the bankruptcy court’s decision in March.
Texas-based Optim and several subsidiaries sought court protection after a drop in wholesale energy prices left the company with little cash and no ability to borrow more, according to court records.
Optim 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 forged ahead with an amended Chapter 11 plan that has Cascade taking control of those plants.
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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