https://bankruptcompanynews.com/erin-energy-chapter-7-conversion-...

https://bankruptcompanynews.com/erin-energy-chapter-7-conversion-sought/

by Nick Montgomery on June 28, 2018

Erin Energy’s Official Committee of Unsecured Creditors filed with the U.S. Bankruptcy Court a motion to convert these Chapter 11 cases to cases under Chapter 7.

The Committee asserts, “‘Cause’ exists to convert these cases to cases under chapter 7 because the Debtors have experienced substantial and continuing losses and it’s unlikely that the Debtors’ business can be rehabilitated. Indeed, the following facts are undisputed: The Debtors have virtually no cash (other than the four-week lifeline provided by the interim debtor-in-possession financing); The Debtors’ previous motion for the use of cash collateral was denied; The Debtors have not generated any revenue since the fall of 2017; The Debtors have incurred millions of dollars of monthly expenses during these cases, generating substantial losses; The Debtors have not been profitable, and have experienced continuing losses, since at least 2016; According to the Debtors’ financial advisor, the Debtors will not have any third-party financing in place on July 6, and will not engage in substantive discussions concerning possible financing prior to that time; The Debtors’ prior business plan (presented on May 28 in connection with the Cash Collateral Motion, but apparently abandoned) was built on a series of flawed assumptions and was not credible; and Even if the Debtors prevail in the litigation pending in Nigeria on July 6, disputes over title to the assets may remain, preventing any sale of such assets. The Debtors have no viable path forward and should not be permitted to gamble with creditors’ money. For these reasons, and for those that will be established at trial, the Motion should be granted.”

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https://bankruptcompanynews.com/erin-energy-objection-filed/

Erin Energy Objection Filed

BY NICK MONTGOMERY ON JUNE 19, 2018

Erin Energy’s Official Committee of Unsecured Creditors filed with the U.S. Bankruptcy Court an objection to the Debtors’ motion to incur post-petition secured indebtedness.

The committee asserts, “The DIP Loan is a bridge to nowhere. While the DIP Lender may be willing to blindly travel along this bridge, the Committee is not and would prefer to take the next exit – chapter 7. The Committee submits that the Debtors’ assets and pending litigation can effectively be administered by a chapter 7 trustee while avoiding the need to incur additional indebtedness, including the millions of dollars required to restart operations. The DIP Loan is sized to cover the cost of the Debtors’ remaining operations (mainly payroll) until the July 6 hearing in Nigeria. However, regardless of the outcome of the hearing, there is no dispute that the Debtors will have insufficient funds to operate after July 13. Moreover, the DIP Lender has declined to make any further funds available to the Debtors, regardless of the outcome of the hearing. Under the circumstances, the DIP Loan provides no measurable benefit to creditors or these estates. Instead, the proceeds of the DIP Loan will primarily be used to pay management that currently sits in empty offices with nothing to do. Moreover, the DIP Loan will be secured by unencumbered assets and the DIP Lender will receive a superpriority claim that may be paid from the proceeds of unencumbered assets – effectively stripping away the only meaningful assets available to satisfy general unsecured claims. The obligations of the DIP Loan will ultimately be borne by the general unsecured creditors. Whether the DIP Lender is repaid from the proceeds of unencumbered assets or the secured creditors that are primed enforce their superpriority claims against the unencumbered assets, the DIP Loan will ultimately put $1.1 million in obligations ahead of general unsecured creditors.”