Intervention Energy Holdings will remain under court protection after a federal judge declined a request from EIG Global Energy Partners to toss out the debtors’ Chapter 11 case.
A Wilmington, Delaware, bankruptcy judge, Kevin Carey, on Friday (3 June) signed an order denying a motion submitted by an EIG fund, which holds $140 million in Intervention’s senior secured notes. EIG also holds one common share out of 22 million shares of Intervention’s equity.
EIG attorney Domenic Pacitti of Klehr Harrison Harvey Branzburg was not available for comment. EIG spokesman Brandon Messina declined to comment.
One issue Carey addressed in the opinion accompanying the order addressed EIG’s main point of contention: as an equity holder, EIG said it held the right to consent to a bankruptcy filing. The asserted right came as a result of a prepetition forbearance agreement which included a clause requiring unanimous consent among the equity holders before.
Carey agreed with the points Intervention made in an objection filed last Tuesday (31 May), in which the debtor said “courts have viewed with skepticism provisions which have created obstacles to a [bankruptcy].”
“The federal public policy to be guarded here is to assure access to the right of a person, including a business entity,” Carey wrote in the opinion, “to seek federal bankruptcy relief as authorized by the Constitution and enacted by Congress. It is beyond cavil that a state cannot deny to an individual such a right. I agree with those courts that hold the same applies to a ‘corporate’ or business entity, in this case an LLC.”
Neither Intervention president John Zimmerman nor debtor counsel Thomas Califano of DLA Piper could be reached for comment.
On 20 May, Intervention sought court protection after it reached an agreement with EIG that would have waived all the debtors’ defaults if it could raise $30 million to pay down a portion of the secured notes by 1 June.