Cox Oil committee expresses some concerns about sale process

By Sarah Lizee

Olympia, Wash., June 15 – Cox Oil Offshore, LLC’s official committee of unsecured creditors gave general support for the company’s proposed bid procedures but expressed some concerns in a statement filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee said creditors with invalid claims and liens shouldn’t be able to obtain assets via credit bid, and the sale process should not prejudice the committee’s challenge right.

The committee said it has started an investigation of the claims and liens of BP Energy Co. and Amarillo National Bank, the company’s debtor-in-possession lenders, and other prepetition secured parties, subject to the challenge procedure the court approved under the final DIP order.

But sales may occur before the committee’s prospective challenges are resolved, and there should be a remedy if assets are sold to a credit bidder with liens that are subsequently determined to be invalid, the group said.

The committee said that in order to minimize this risk, the bid procedures should provide that any potential bidder must give advance notice of its intent to credit bid to the debtors and the consultation parties.

The debtors should also provide clear notice to any prospective credit bidder that the sale process and right to credit bid do not impair the committee’s investigation and challenge rights, the group added.

The committee said the debtors should also be prepared to extend the sale process if doing so may increase competitive bidding and value for the estates.

The committee also said the debtors “must be cautious” not to abandon unsecured creditors after the sale process.

At this point, there is no proposal for a wind-down after the sale process or funds reserved for it.

“The cases may be poised for conversion to Chapter 7, in which case administrative creditors, including post-petition trade creditors, and general unsecured creditors alike may receive little or no recovery,” the committee said in the statement.

“The sale process should not be used to transfer good assets, strand bad assets and liabilities (including significant P&A liabilities), and leave the estates administratively insolvent.”

The group said the debtors must confront this risk and explain to all stakeholders how they intend to manage it.

“They cannot simply saddle the estates with the cost of a foreclosure for the sole benefit of the DIP lenders at the expense of other creditors,” the committee said.

The Dallas-based drilling company filed bankruptcy on May 14 under Chapter 11 case number 23-90328. Four creditors filed an involuntary Chapter 7 petition against the company in the U.S. Bankruptcy Court for the Eastern District of Louisiana on May 12 under case number 23-10734.

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