Xinergy shareholders denied official equity committee representation

By Caroline Salls

Pittsburgh, June 4 – Xinergy Ltd. shareholder Jon Nix’s motion for appointment of an official committee of equity security holders for the company’s Chapter 11 case was denied Thursday by the U.S. Bankruptcy Court for the Western District of Virginia.

As previously reported, Xinergy and an informal group of holders of its 9¼% senior secured notes objected to the committee appointment motion.

In its objection, the company said “the extraordinary remedy of appointing an official committee of equity security holders is not in the best interests of the debtors’ estates or creditors.”

Xinergy said Nix “cannot meet his considerable burden of proving that the appointment of such a committee is necessary to assure the adequate representation of equity holders.”

The company said Nix already claims to represent the interests of equity, he is represented by capable counsel who has appeared in the Xinergy proceedings, and there is no need for official status for his voice to be heard.

In addition, Xinergy said shifting the considerable cost of equity holders’ representation to the company’s estate is not appropriate where it is already working to maximize value for the bankruptcy estates, including for equity holders, and cannot bear the additional expenses of having two committees and two sets of professionals to those committees.

The noteholder group echoed the company’s argument that Nix has not established that an official equity committee is necessary to ensure that the interests of shareholders are adequately represented.

The noteholders said Nix has also not shown that “there is a substantial likelihood that [shareholders] will receive a meaningful distribution in the case under a strict application of the absolute priority rule.”

Xinergy, a Knoxville, Tenn.-based coal producer, filed for bankruptcy on April 6. The Chapter 11 case number is 15-70444.

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