IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION IN RE:
ENERGY PARTNERS, LTD., ET AL.,1 DEBTORS. § § § § § § CASE NO. 09-32957 (Chapter 11) (Jointly Administered)
Hearing: July 29, 2009; 10:30 a.m. Related to Dkt. Nos. 337, 338, 339 & 340 DEBTORS’ OMNIBUS RESPONSE TO OBJECTIONS TO CONFIRMATION
OF THE SECOND AMENDED JOINT PLAN OF REORGANIZATION OF ENERGY PARTNERS, LTD. AND CERTAIN OF ITS SUBSIDIARIES
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE TO THE HONORABLE JEFF BOHM,
UNITED STATES BANKRUPTCY JUDGE:
Energy Partners, Ltd. (“EPL” or the “Company”) and its affiliated debtor entities, as debtors and debtors in possession (collectively, the “Debtors”), by and through their undersigned counsel, hereby file this Omnibus Response to Objections to Confirmation of the Second Amended Joint Plan of Reorganization of Energy Partners, Ltd.. and Certain of its Subsidiaries under Chapter 11 of the Bankruptcy Code (“Response”).2
INTRODUCTION
1. The Second Amended Joint Plan of Reorganization of Energy Partners, Ltd. and Certain of its Subsidiaries under Chapter 11 of the Bankruptcy Code (the “Plan”) represents the culmination of efforts by the Debtors, the Official Committee of Unsecured Noteholders (the “Noteholder Committee”), and their respective Professionals and advisors to effectuate a restructuring of the Debtors that (a) provides a mechanism for preserving the Debtors’ going
1
The Debtors include Energy Partners, Ltd., EPL Pipeline, L.L.C., Nighthawk, L.L.C., EPL of Louisiana, L.L.C., Delaware EPL of Texas, LLC, and EPL Pioneer Houston, Inc.
2
Capitalized terms not defined herein shall have the meaning given to them in the Plan. This response will cover all objections to confirmation except for the objections, if any, asserted by Walter Oil, Chevron, and W&T Offshore, which are subject to an extended objection deadline.
concern value through prompt emergence from these Chapter 11 Cases; (b) preserves creditor and customer relationships by not impairing Claims held by employees or trade creditors; (c) preserves jobs of the Debtors’ employees in connection with the Debtors’ go-forward operations; and (d) provides for a Distribution agreed upon by the vast majority of Holders of Claims who are Impaired under the Plan.
2. The Debtors submit that the Plan satisfies all requisite elements of §1129(a) of the Bankruptcy Code (other than § 1129(a)(8)) and, with respect to Classes 8 and 9, the cramdown requirements of § 1129(b), and, therefore, the Plan should be confirmed.
II. BACKGROUND AND EVENTS LEADING UP TO CONFIRMATION HEARING
A. Business Overview
3. Founded in 1998, EPL is an independent oil and natural gas exploration and production company. The other Debtors are wholly-owned subsidiaries of EPL. The Debtors’ current operations are concentrated in the shallow to moderate depth waters in the Gulf of Mexico, as well as the deepwater Gulf of Mexico in depths less than 5,000 feet. EPL maintains corporate offices in Houston, Texas and New Orleans, Louisiana.3
B. The Pre-Negotiated Plan Structure
4. As a result of liquidity constraints and other negative events, the Debtors undertook an effort to consensually restructure their balance sheet. To this end, in March of 2009, the Debtors commenced negotiations with an ad hoc committee (the “Ad Hoc Committee”) comprised of institutions holding over 66 and 2/3% in principal amount of the
3
Additional information concerning the Debtors, their financial condition, and results of operations, on a consolidated basis, can be found in EPL’s annual, quarterly, and current reports filed with the Securities and Exchange Commission (“SEC”), as well as in EPL’s other recent SEC filings, which can be accessed at www.sec.gov and at EPL’s website, www.eplweb.com. Pleadings filed in these Cases may be obtained from the website maintained by the Debtors’ claims and noticing agent at http://chapter11.epiqsystems.com/epl.
Senior Unsecured Notes. As a result of these negotiations, on April 30, 2009, the Debtors and the members of the Ad Hoc Committee entered into a Plan Support and Lock-Up Agreement (the “Plan Support Agreement”). The Plan Support Agreement and the term sheet attached thereto (the “Term Sheet”) provide for the Debtors’ financial restructuring to be effected through a pre-negotiated plan, which the members of the Ad Hoc Committee have agreed to support. A copy of the Plan Support Agreement and Term Sheet may be found at Exhibit E to the Disclosure Statement.
C. Highlights of the Plan
5. In accordance with the Plan Support Agreement, the Debtors filed their proposed disclosure statement and plan with the Court on May 15, 2009. On June 16, 2009, the Court entered an order (Dkt. No. 231) approving the disclosure statement, with certain modifications, and authorizing the Debtors to solicit votes from certain parties in interest. The proposed Plan contemplates:
a. Conversion of EPL’s outstanding Senior Notes into 100% of reorganized EPL’s issued and outstanding common stock upon its emergence from bankruptcy;
b. Current Holders of EPL Common Stock would receive warrants exercisable for 12.5% of reorganized EPL’s common stock as of the Plan Effective Date;
c. Secured debt obligations under the Credit Agreement, representing approximately $83 million of indebtedness, will be unimpaired;
d. Obligations owed to the MMS will be handled in accordance with a settlement reached between the Debtors and the MMS and as set forth in the Plan; and
e. 100% cash recovery for unsecured creditors to be paid in accordance with the terms set forth in the Plan.
6. In accordance with the Plan, on July 19, 2009, the Debtors filed with the Bankruptcy Court various documents comprising the Plan Supplement (Dkt. No. 329, the “Plan Supplement”).
D. Appointment of the Official Committees
7. On June 1, 2009, the Office of the United States Trustee appointed the Official Committee of Unsecured Creditors to represent the interests of the Debtors’ unsecured creditors. On June 4, 2009, the Office of the United States Trustee appointed the Noteholder Committee to represent the interests of the Senior Notes. Subsequently, on June 29, 2009, the Office of the United States Trustee appointed the Official Committee of Equity Security Holders to represent the interests of the holders of EPL’s common stock.
E. Solicitation of Votes
8. On May 12, 2009, the Debtors’ filed an application requesting authority to retain Epiq Bankruptcy Solutions, LLC (“Epiq”) as their claims, balloting, and noticing agent, which application was approved by this Court on May 27, 2009.
9. In accordance with the Disclosure Statement Order, on or about June 22, 2009, the Debtors, through Epiq, distributed Solicitation Packages to Holders of Eligible Claims and Equity Interests4 and various forms of notice approved by the Court to parties not entitled to vote on the Plan.
10. Class 7 (the only Impaired Class of Claims) voted overwhelmingly accepted the Plan, while Class 8 (Impaired Equity Interests) did not meet the statutory predicates for acceptance of the Plan. Class 9 (EPL Other Equity Interests), was Impaired under the Plan and deemed not to have accepted the Plan pursuant to § 1126(g).
11. The Debtors submit that the Plan satisfies all requisite elements of §1129(a) of the Bankruptcy Code (other than § 1129(a)(8)) and, with respect to Classes 5 and 9, the cramdown requirements of § 1129(b), and, therefore, the Plan should be confirmed.
4
Only two classes, Class 7 (Senior Note Claims) and Class 8 (EPL Common Stock Interest) were impaired and entitled to vote on the Plan.
OBJECTIONS BY THE PREPETITION SECURED LENDERS
12. Bank of America, N.A., as administrative agent (the “Agent”) for the Prepetition Secured Lenders, objects to the Plan solely to the extent it seeks to “reinstate” the Credit Agreement.5 Based upon discussions with the Noteholder Committee and the Agent, the Debtors have agreed that the reinstatement option with respect to the Credit Agreement will not be exercised by the Debtors and that the Credit Agreement Claim will be paid in full.
13. Apart from the objection filed by the Agent,6 BNP Paribas filed a separate objection7 to the Plan on the grounds that: (a) the Plan is not feasible because no exit facility is in place, nor has an alternative source of capital been identified; (b) the Plan does not indicate how the Credit Agreement could be reinstated or how prepetition defaults would be cured; and (c) the Credit Agreement Claim is improperly classified as unimpaired due to the proposed reinstatement. Because the Plan option to reinstate the Credit Agreement will not be exercised, BNP’s objections to reinstatement, cure, and impairment are moot. Moreover, as discussed below, the Debtors’ failure to identify the specific terms of exit financing does not affect Plan feasibility.
14. The Debtors are in negotiations with various parties regarding exit financing and have filed a motion with the Bankruptcy Court seeking authority to sign a proposal letter with GE Energy Financial Services, Inc. (“GE Capital”) regarding the Debtors’ proposed exit facility. Although subject to additional diligence, GE has proposed a senior secured credit facility of between $70 million - $100 million. Further, as will be addressed at the confirmation hearing,
5
See Docket No. 338. 6
Fortis Capital Corp., another of the Prepetition Secured Lenders, filed a separate joinder to the objections filed by the Agent and BNP. See Docket No. 340
7
certain members of the Noteholder Committee are available to back-stop the Debtors exit facility and, if necessary, provide bridge financing to permit the Debtors’ exit from bankruptcy. Such facility will provide sufficient funds to pay the Credit Agreement claims in full.
OBJECTIONS BY TAXING AUTHORITIES
15. Various taxing authorities have raised limited objections to the Plan.8 The Debtors intend to work with these taxing authorities to include mutually acceptable language in the Plan or confirmation order or to otherwise address their concerns by directing them to existing Plan language.
CONCLUSION
For the foregoing reasons, the Court should (i) confirm the Plan, (ii) overrule any objections filed with respect to the Plan that are not consensually resolved, and (iii) grant the Debtors such other and further relief as is just and proper.
8
Dated: July 27, 2009
Respectfully submitted, VINSON & ELKINS LLP
By: /s/ Paul E. Heath
Paul E. Heath, SBT #093555050 Michaela C. Crocker, SBT #24031985 Trammell Crow Center
2001 Ross Avenue, Suite 3700 Dallas, Texas 75201 Tel: 214.220.7700 Fax: 214.999.7787 [email protected] [email protected] and Duston K. McFaul
1001 Fannin Street, Suite 2300 Houston, Texas 77002
Tel: 713.758.2222 Fax: 713.758.2346 [email protected]
