ATP unsecured creditors, second-lien noteholders object to extension

By Caroline Salls

Pittsburgh, Dec. 31 - ATP Oil & Gas Corp.'s official committee of unsecured creditors and an informal committee comprised of holders of the company's 11 7/8% senior second-lien notes due 2015 objected to ATP's proposed exclusivity extension, according to Monday filings with the U.S. Bankruptcy Court for the Southern District of Texas.

The unsecured creditors committee said the company has "contractually bound itself to liquidate substantially all of its assets for the sole benefit of the [debtor-in-possession] lenders unless a highly conditional plan of reorganization can be consummated in the near term."

The creditor group said the company has not only failed to demonstrate good faith progress toward a reorganization, but its commitment to liquidate its assets in the near term through a plan that pays the DIP lenders more than $625 million of claims in full in cash or otherwise meets the DIP lenders' approval reflects the opposite.

"The debtor encumbered nearly all of its assets in exchange for an expensive roll-up financing package, leaving the estate and the committee very little flexibility to achieve better financing terms," the unsecured creditors committee said in its objection.

"Since its Chapter 11 filing, the debtor has missed milestone after milestone under the DIP facility, and now finds itself at the mercy of the DIP lenders and their ability to cause a liquidation of the estate for their sole benefit.

"And, perhaps most troubling, knowing that it faces almost certain liquidation, the debtor has no viable business plan around which to formulate a plan of reorganization.

"Given its condition, the debtor should welcome every potential alternative to its contractually compelled liquidation."

Market value decline

In its objection, the noteholder committee said the company's $1.5 billion of second-lien notes are now trading at about 10 cents on the dollar, down from 30 cents on the dollar when ATP's bankruptcy case began.

The noteholders said ATP's DIP financing is likewise trading well below par, and unsecured claims and common stock have no meaningful market value.

"The precipitous decline in the market value of the second-lien notes has occurred against the backdrop of significant operational and financing setbacks," the noteholders said in their objection.

Specifically, the noteholder group said the commercial operation of the company's Clipper Wells project has been repeatedly delayed, and, as a result of ATP's failure to meet DIP agreement conditions for funding, it has been forced to undertake an expedited sale process.

Time crunch

The noteholders said the sale process "will likely require bidders and financing sources to make critical decisions before the success of the Clipper project is known" and while litigation remains unresolved.

The company's sale schedule "leaves precious little time" for holders of second-lien notes to determine whether they want to own ATP's equity or assets and, if so, how to deal with the claims of the DIP lenders and other creditors, the noteholders said.

"Members of the committee should no longer be hostage to the debtor as they seek to protect their investment in the context of the sale process," the noteholder group said.

"If second-lien noteholders determine that the best way to maximize value is to sponsor their own plan of reorganization, they should not be held up by a debtor that has already lost control of this case, including the timing and the process under which its core assets will be marketed and sold."

ATP Oil & Gas is a Houston-based offshore oil and gas development and production company focused in the Gulf of Mexico, the Mediterranean Sea and the North Sea. The company filed for bankruptcy on Aug. 17 under Chapter 11 case number 12-36187.

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