Rockall Energy DIP financing draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., March 25 – Rockall Energy Holdings, LLC’s motion seeking final approval of a $51 million debtor-in-possession facility drew an objection on Friday from Region 6 U.S. trustee William T. Neary, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

The facility consists of $17 million in new money term loans and $34 million of DIP roll-up obligations.

Neary said the DIP facility inappropriately improves the position of Goldman Sachs Bank USA and Shell Trading Risk Management, LLC by granting a superpriority claim of prepetition debt over post-petition debt, including certain unmortgaged Mississippi real estate and Chapter 5 avoidance actions.

“The motion is silent as to how the $34 million roll-up of pre-petition debt benefits the estate,” the U.S. trustee said in his objection.

“The motion is also silent as to the potential value of the debtors’ unencumbered Mississippi assets or Chapter 5 avoidance actions.”

Neary said that given that the case is a pre-negotiated plan without the vote of general unsecured creditors, the debtors and DIP lenders should be required to produce evidence as to what value is provided to the estate by the DIP facility and why general unsecured creditors should be deprived of a recovery from potentially valuable causes of action.

As previously reported, the company has access to $5 million of the new money and $10 million of the roll-up following an interim order.

Interest is SOFR plus 700 basis points with a 1% floor. There is a 2% commitment fee.

The financing is set to mature on 90 days after the petition date.

The company also has interim access to the cash collateral of its prepetition secured lenders.

The Dallas-based oil exploration and production company filed Chapter 11 bankruptcy on March 9 under case number 22-90000.

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