Mountain Express Oil judge dubs case ‘a mess,’ calls for mediation

By Sarah Lizee

Olympia, Wash., Aug. 8 – Mountain Express Oil Co. and its debtor-in-possession lenders are set to mediate following a Monday hearing wherein judge David R. Jones called the case “a mess” after learning about the company’s complicated sale process.

Prior to the hearing, the debtors filed a notice of successful bid and letter of intent outlining a proposed $49 million sale of most of their assets to GPM Investments, LLC, a subsidiary of Arko Corp. Of the amount, $20 million is expected to be payable at closing to the DIP lenders.

Before the auction, the debtors received 14 bids, but none were qualified under the bid procedures.

The company then decided to extend the sale timeline to allow for as many bidders as possible to qualify for an auction. However, the DIP lenders opposed extending the auction, which was moved to Aug. 2 from July 28.

On the day the auction was held, DIP agent First Horizon Bank filed a notice with the court saying the debtors had defaulted by not holding the auction by July 28. Through the notice, the DIP lenders have terminated the debtors’ ability to use cash collateral as of Aug. 3, and have accelerated the DIP loan.

The DIP lenders oppose the proposed sale to GPM, and the official committee of unsecured creditors wanted more information about the transaction before giving its support.

The company said it also believed the DIP lenders would be filing a motion to convert the cases to Chapter 7.

At the Monday hearing, the company asked the court to indicate that it could approve the sale without the lenders’ consent, as well as the use of cash collateral for a one-week period.

Counsel for the DIP agent said at the Monday hearing that the debtors had basically ignored the bid procedures throughout the process by not providing binding offers in time and not meeting the required deadlines.

“We have spent close to $50 million trying to get to a deal, and the lenders believe that they’re probably going to get more in a Chapter 7 liquidation, and they’re taking steps that any reasonable lenders would take under these dire circumstances,” counsel for the DIP group said at the hearing.

The unsecured creditors committee filed its own statement Monday expressing its concerns, saying it has become increasingly clear that the debtors and the DIP lenders “are not behaving like rational economic actors” and that their relationship has “devolved into one of mistrust and blame shifting.”

“While the committee would absolutely prefer a path that avoids the conversion of these cases, preserves jobs, and sells the debtors’ business as a going concern, the option presented by the debtors is unworkable based on the information the committee has at this point in time,” the group said.

After hearing the arguments, judge Jones recognized that the sale process had failed and asked the parties to try to come up with a solution that minimizes harm as much as possible.

Jones signed an order on Monday ordering the parties to mediate all issues discussed at the hearing. Judge Margin Isgur has agreed to act as mediator.

The Alpharetta, Ga.-based fuel distributor filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas on March 18 under case number 23-90147.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.