Delta Petroleum Corp., an oil and natural-gas explorer and developer, decided against selling virtually all its assets and instead chose to reorganize the company under a restructuring plan sponsored by Laramie Energy II LLC.
The company on April 24 and 25 held an informal round of bidding with six interested parties, entertaining offers to either buy the assets or proposals to back a reorganization plan to exit bankruptcy.
Delta determined that Laramie made the “highest and best offer” for the assets, according to court documents filed May 4 in U.S. Bankruptcy Court in Wilmington, Delaware.
“Laramie has offered the highest overall economic value as compared to the other bids,” said Carl E. Lakey, Delta’s chief executive officer, in court papers.
Delta and Laramie intend to create a joint venture called Piceance Energy LLC, which would hold the companies’ oil and gas, surface real estate and other related assets located in Garfield and Mesa Counties, Colorado. Delta’s oil and gas lease with Buzzard Creek Elk Ranch in Mesa County would be excluded.
Under a yet-to-be-filed plan of reorganization, which would have to be vetted by creditors and approved by the court, Delta would get one-third of the equity interest in the joint venture and Laramie the other two-thirds.
Bankruptcy Court Hearing
Delta will ask U.S. Bankruptcy Judge Kevin J. Carey to approve Laramie as the sponsor for a restructuring plan at a hearing scheduled for tomorrow.
The company changed its original plan to sell the assets through a bankruptcy auction, concluding it could generate a greater recovery for stakeholders if they allowed offers that would preserve its net operating loss carryforwards and other tax attributes. Delta has about $885 million in NOLs, which it says could result in about $309.8 million in tax savings.
Delta, based in Denver, 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 predominately operates out of the Piceance Basin in the Rocky Mountain region of Colorado. Kirk Kerkorian, the billionaire founder of MGM Resorts International, is the company’s largest shareholder, owning a 33 percent stake in Delta, 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 69.5 cents on the dollar as of March 29, and the 3.75 percent notes traded at 60 cents on the dollar as of April 13, 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).