Delta Petroleum Corp., an oil and natural-gas explorer and developer, will receive court approval of its restructuring plan setting up a joint venture with Laramie Energy II LLC.
U.S. Bankruptcy Judge Kevin J. Carey at a hearing today in Wilmington, Delaware, said he will approve Denver-based Delta’s plan giving creditors equity interests in a reorganized company that will own 33 percent of the joint venture, Piceance Energy LLC, after clarifying language is added.
Under the restructuring plan there would be two entities: the joint venture and the reorganized Delta, according to court papers. Reorganized Delta would get one-third of the equity interest in the venture and Laramie the rest, according to court documents. Delta would also get $75 million to make payments under the plan.
Piceance Energy would hold the companies’ oil and gas, surface real estate and other related assets in Colorado’s Garfield and Mesa counties. Delta’s oil and gas lease with Buzzard Creek Elk Ranch in Mesa County would be excluded.
Delta has received two other offers to co-sponsor its reorganization plan since reaching a deal with Laramie, Kathryn Coleman, a lawyer for the company, told Carey.
Coleman said that despite the offers there wasn’t enough reason to delay seeking approval of the plan today for one of them because the company doesn’t want to lose Laramie “to chase something that may or may not be real.”
“Things aren’t all buttoned-up with Laramie,” she said, noting that they still need to complete exit financing.
If one of those offers matures into something “we have no option but to go forward with that,” Coleman said. The company may cancel the deal with Laramie up until the day the plan becomes effective.
After holding bidding on April 24 and 25 to either sell the assets or sponsor a reorganization plan, Delta determined that Laramie made the “highest and best offer” for the assets, according to court documents.
The company determined it could provide a greater recovery for stakeholders if they allowed offers to back a recovery plan that would preserve its net operating loss carryforwards and other tax attributes. Delta has about $885 million in NOLs, which could result in about $309.8 million in tax savings, court papers show.
Delta listed $375.5 million in assets and $310.7 million in debt in Chapter 11 papers filed Dec. 15 when it sought bankruptcy protection. The company mostly operates out of the Piceance Basin in the Rocky Mountain region of Colorado.
Kirk Kerkorian, the billionaire founder of MGM Resorts International (MGM), is Delta’s largest shareholder, owning a 33 percent stake, according to data compiled by Bloomberg. Kerkorian invested at least $684 million in Delta.
Delta owes $152.2 million on 7 percent notes due in 2015 and $115.5 million on 3.75 percent notes due in 2037, according to court documents. The 7 percent notes traded at 57 cents on the dollar as of Aug. 1, and the 3.75 percent notes traded at 33 cents on the dollar as of July 31, according to Trace, the bond-price reporting system of the Financial Industry Regulation Authority.
The case is In re Delta Petroleum Corp., 11-14006, U.S. Bankruptcy Court, District of Delaware (Wilmington).