Volunteer Energy files Chapter 11 with over $50 million in debt

By Sarah Lizee

Olympia, Wash., March 28 – Volunteer Energy Services Inc. filed Chapter 11 bankruptcy on Friday in the U.S. Bankruptcy Court for the Southern District of Ohio, according to court documents.

From 2016 to 2021, although the company’s gross profit remained positive, its net income financial performance was inconsistent due to warm winters, Covid-19 and winter storm Uri, David Warner, chief financial officer of the company, said in a declaration.

As a result, Volunteer Energy triggered various events of default under its $42 million credit agreement with PNC Bank, NA for failing to maintain minimum undrawn availability and average balance of revolving advances. To remedy the defaults, the credit agreement was amended several times.

Since a June 26, 2020 amendment, PNC has been lending to the company under a series of weekly or monthly extensions and forbearance agreements.

In May 2021, the company launched a process to sell its assets. The sale process was conducted in parallel with ongoing refinancing efforts.

In fall, the company began negotiations with a prospective purchaser interested in acquiring the company’s ownership interests. However, the parties were unable to agree to post-closing working capital financing terms, which prevented the sale from going forward.

In February, the company restarted its marketing efforts for a potential asset sale.

On March 25, the debtor defaulted on about $12.6 million in payments due to its wholesale energy suppliers.

“These defaults create an irreversible domino effect resulting in the need for Chapter 11 relief,” Warner said in the declaration.

Warner said wholesale energy suppliers may refuse to enter new short-term commitments to continue to provide energy to the debtor, and then the company will then have no means to procure enough energy to service its customers. The process will begin for transitioning the debtor’s customers to default service at the applicable electric utility or natural gas local distribution company. Until those customers are successfully transitioned, the company will incur severe daily penalties for the energy that local distribution companies will provide to customers on the debtor’s behalf.

The CFO said the goal of the Chapter 11 case is to speed up transitioning the debtor’s customers to default service to stop the unnecessary imposition of significant penalties against the company, which will allow it to conduct an orderly wind-down for the benefit of all stakeholders.

Volunteer Energy filed a motion Monday afternoon seeking approval of a $5 million debtor-in-possession facility with PNC Bank as lender. Interest will be a base rate plus 5%.

The company listed $50 million to $100 million in both assets and liabilities.

Its largest unsecured creditors are Sequent Energy Management LLC, based in Houston, with an $8.95 million supplier gas claim, Eco-Energy, based in Franklin, Tenn., with a $4.15 million supplier gas claim, Shell Energy North America (US) LP, based in Houston, with a $2.49 million suppler power and gas claim, Columbia Gas Transmission Corp., based in Houston, with a $2.4 million pipeline/transmission claim, Arm Energy Management, LLC, based in Houston, with a $2.22 million supplier gas claim, BP Energy Co., based in Houston, with a $2.08 million supplier gas claim, and DTE Energy Trading Inc., based in Ann Arbor, Mich., with a $2.02 million supplier gas claim.

The Pickerington, Ohio-based retail energy provider filed Chapter 11 bankruptcy under case number 22-50804.

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