The pleadings discussed in this FAQ section are pleadings typically filed in a large Chapter 11 bankruptcy case.
• Why am I receiving notices with respect to the bankruptcy proceedings for Provident Royalties, Inc. and a number of its affiliates?
The bankruptcy court is providing notice of various events in the bankruptcy proceedings to parties who may have claims in the bankruptcy proceedings. For example, if you hold preferred shares in one of the entities in bankruptcy, then you may have a claim to a share of any assets held by that entity. We are not authorized to give you legal advice or legal opinions. If you have questions about a specific notice or your potential claim, please contact the attorney for the Official Investors' Committee, Buzz Rochelle, (214) 953-0182; buzzrochelle@romclawyers.com or the attorney for the Official Committee of Unsecured Creditors, Holland O'Neil, (214) 999-4961; honeil@gardere.com.
• I am a preferred shareholder in one of the entities in bankruptcy, what do I need to do to make a claim in the bankruptcy?
Please go to the company's website at www.providentroyalties.com, scroll to the end and click on "Claim Information and Court Documents". Information relating to filing a proof of claim and a blank claim form are located there. We are not authorized to give you legal advice or legal opinions. If you have questions about a specific notice or your potential claim, please contact the attorney for the Official Investors' Committee, Buzz Rochelle, (214) 953-0182; buzzrochelle@romclawyers.com or the attorney for the Official Committee of Unsecured Creditors, Holland O'Neil, (214) 999-4961; honeil@gardere.com.
• I am a preferred shareholder in one of the entities in bankruptcy, what is the value of my claim?
This has not yet been determined. The bankruptcy court will determine the highest and best use of the assets of the entities in bankruptcy, and will either liquidate the assets or allow a reorganization of the entities. The bankruptcy court will also determine what distributions should be made to creditors, including holders of preferred shares. Currently, the value of the assets appears to be a small fraction of the potential claims against them.
About the Receivership
• What is a Receiver?
A Receiver is a person appointed by a court for the purpose of preserving property of a debtor pending an action against him, or applying the property in satisfaction of a creditor's claim, whenever there is danger that, in the absence of such an appointment, the property will be lost, removed or injured. The Receiver is a neutral person between the parties to a cause, appointed by the court to receive and preserve the property or fund in litigation, and receive its rents, issues, and profits, and apply or dispose of them at the direction of the court when it does not seem reasonable that either party should hold them. The Receiver is a fiduciary of the court, appointed as an incident to other proceedings wherein certain ultimate relief is prayed. He is a trustee or ministerial officer representing the court and all parties in interest to litigation, and property or fund entrusted to him.
• How does a receivership work?
No two receiverships are exactly the same. The basic structure, however, involves an independent person appointed by the Court (the Receiver), who is charged with collecting and liquidating assets of the Defendants and Relief Defendants. The Receiver sends claim forms to each creditor (including investors) and makes a recommendation to the Court about those that should be approved. After the Court has considered the claims, the Receiver submits a plan for distributing the funds that he has collected.
• Who is Dennis L. Roossien, Jr.? Is he an employee of the Securities and Exchange Commission?
Dennis L. Roossien, Jr. is a lawyer engaged in the private practice of law through the firm of Munsch Hardt Kopf & Harr, P.C., 3800 Lincoln Plaza, 500 North Akard St., Dallas, Texas 75201. Mr. Roossien specializes in the areas of civil trial law and business bankruptcy law. He is an experienced receiver and has been appointed at the request of the Securities and Exchange Commission in other cases requiring a receiver. Mr. Roossien, however, does not work for or take instructions from the Securities and Exchange Commission ("SEC"). He is appointed by and answers directly to the United States District Court. Since Mr. Roossien serves at the SEC's request, he does work closely with them and tries to respect their position regarding his duties as Receiver.
• How are the Receiver and his legal and accounting professionals paid?
On July 2, 2009, the Court issued its Order Appointing Receiver. Paragraphs 60-62 of that Order provides for the procedure by which the Receiver’s fees and expenses are to be paid. A copy of the Order is posted on the first page of our website under "Important Notice".
In short, all fees and expenses are ultimately subject to Court approval and will be paid out of funds collected by the Receiver.
• Can the Receiver give me legal advice or should I hire an attorney to help me in this case?
The Receiver and his staff cannot and will not give any legal advice with respect to this case. Therefore, should you believe that you need an attorney, you may hire your own. Please be aware, however, that the Receiver is acting in the interests of all investors by identifying, locating, and liquidating assets as quickly as possible and efficiently paying those proceeds to legitimate claimants as permitted by the court. Generally, there is little that an attorney can do to expedite that process or increase the amount that you ultimately receive. Most likely, an attorney will only be able to obtain information that is already made available on this website.
• How do I get my money from the Receiver? Is there going to be a claims process? What should I be doing now?
There is nothing for you to do at the present time. There will be a claims process in the Receivership and you will get notice. The Receiver will provide notice to all creditors and investors and provide a claim form for you to complete and submit to the Receiver. Keep monitoring the company website at www.providentroyalties.com as the announcements about all important events, including the claims process, will be made there.
• Does the SEC get a portion of the money held by the Receiver?
No, the net of all funds obtained by the Receiver will be paid to the claimants as the court decides.
• When will I receive my portion of the funds? How much can I expect?
It is far too early for the Receiver to project how much will be collected, what return investors can expect, or when the Court will approve the distribution.
• How secure is my investment?
The Receiver cannot provide legal advice to you, and therefore you should consult with your own advisors and attorneys with respect to your investment. The Receiver is in the very initial stages of identifying, locating and liquidating assets. Therefore it is too early to determine the value, if any, of any particular investment at this time. To the extent your rights are directly affected by actions taken in these cases, you should receive notice via this website or through the mail.
• Since each of the royalty programs is a stand-alone corporation, will they be treated as such in the bankruptcy proceedings (i.e., will their assets and liabilities be so segregated)?
Pursuant to Chapter 11 of the United States Bankruptcy Code, a debtor may not pay any creditors or make any distributions to investors for any amounts owing or accrued prior to the filing of the bankruptcy petition without the approval of the bankruptcy court. Recently, Mr. Roossien was also appointed by the bankruptcy court to serve as the Debtor's Chapter 11 Trustee. The Receiver/Trustee as of this time has not determined if or to what extent its constituents may obtain a recovery in respect of claims or investment in any of the specific Debtors. Ultimately, such a determination will depend on a number of factors. The Trustee is working with the constituencies to determine the best alternatives for maximizing recovery under the circumstances. When a plan is formulated, the Receiver/Trustee will provide notice of such plan, and its material terms, to all constituents as required by the bankruptcy court. Until that time, the Receiver/Trustee will not be able to predict the specifics of any plan, nor how much creditors and/or investors may recover, if at all.
• Will current investors have voting rights regarding offers to purchase Shale assets? If not, how will this be handled?
Please note that the Receiver/ Trustee, their attorneys, and their advisors cannot provide any legal advice or give you any legal opinions regarding this matter. While we can provide you certain information that is available to all creditors, investors, and other parties in interest, to the extent you need assistance and understanding how that information may affect you or impact any rights you may have, you should contact your own legal counsel. The Receiver/Trustee is in the very initial stages of identifying, locating and liquidating assets. There will be a claims process in the Receivership and Bankruptcy and you will get notice. When a process is formulated, the Receiver/Trustee will provide notice of such plan, and its material terms, to all constituents. To the extent your rights are directly affected by actions taken in these cases, you should receive notice via this website or through the mail.
• Will the preferred shareholders be allowed to hold onto the assets for the entire duration of their contracts to capitalize on any market upturns?
The Receiver/Trustee cannot provide legal advice or business advice to you, and therefore you should consult with your own advisors and attorneys with respect to your investment. The Receiver/Trustee is in the very initial stages of identifying, locating and liquidating assets. Therefore it is too early to determine the value, if any, of any particular investment at this time. The Receiver/Trustee will provide notice to all creditors and investors with respect to any claims process.
Pursuant to Chapter 11 of the United States Bankruptcy Code, a debtor may not pay any creditors or make any distributions to investors for any amounts owing or accrued prior to the filing of the bankruptcy petition without the approval of the bankruptcy court. The Receiver/Trustee as of this time has not determined if or to what extent its constituents may obtain a recovery in respect of claims or investments in any of the specific Debtors. Ultimately, such a determination will depend on a number of factors. The Receiver/Trustee is working with the constituencies to determine the best alternatives for maximizing recovery under the circumstances. When a plan is formulated, the Receiver/Trustee will provide notice of such plan, and its material terms, to all constituents as required by the court. Until that time, no prediction can be made as to the specifics of any plan, nor how much creditors and/or investors may recover, if at all.
• Is Sinclair Oil the largest creditor? Have they stated what their position is relative to forcing a liquidation?
On July 27, 2009, the Debtors are to file their schedules of assets and liabilities. These schedules should reveal the relative size of the Debtors’ creditors.
Pursuant to Chapter 11 of the United States Bankruptcy Code, a debtor may not pay any creditors or make any distributions to investors for any amounts owing or accrued prior to the filing of the bankruptcy petition without the approval of the bankruptcy court. The Receiver/Trustee as of this time has not determined if or to what extent its constituents may obtain a recovery in respect of claims or investments in any of the specific Debtors. Ultimately, such a determination will depend on a number of factors. The Receiver/Trustee is working with the constituencies to determine the best alternatives for maximizing recovery under the circumstances. When a plan is formulated, the Receiver/Trustee will provide notice of such plan, and its material terms, to all constituents as required by the bankruptcy court. Until that time, the Debtors will not be able to predict the specifics of any plan, nor how much creditors and/or investors may recover, if at all.
• Am I a secured or unsecured creditor?
The Receiver/Trustee, its attorneys, and its advisors cannot provide any legal advice or give you any legal opinions regarding this matter. To the extent you need assistance in understanding how your rights may be affected or impacted by these cases, you should contact your own legal counsel or other advisors.
• What is the real prospect that Provident will actually come out of bankruptcy and manage to make it as a viable company?
Pursuant to Chapter 11 of the United States Bankruptcy Code, a debtor may not pay any creditors or make any distributions to investors for any amounts owing or accrued prior to the filing of the bankruptcy petition without the approval of the bankruptcy court. The Receiver/Trustee as of this time has not determined if or to what extent its constituents may obtain a recovery in respect of claims or investment in any of the specific Debtors. Ultimately, such a determination will depend on a number of factors. The Receiver/Trustee is working with the constituencies to determine the best alternatives for maximizing recovery under the circumstances. When a plan is formulated, you will be provided notice of such plan, and its material terms, to all constituents as required by the bankruptcy court. Until that time, the Debtors will not be able to predict the specifics of any plan, nor how much creditors and/or investors may recover, if at all.
• Should I file a claim with the SIPC? What role does SIPC have in this matter?
No, SIPC has nothing to do with this situation and will not be involved in any claims process nor will it be providing any funds to resolve losses.
We have checked with our contacts at the SEC and FINRA. They both confirm that SIPC is not involved here.
In short, SIPC was established to protect customers from missing securities and other investments. The SEC claims in this matter are that investors in Provident are the victims of a fraud.
Please feel free to google SIPC. The SIPC website states:
SIPC is an important part of the overall system of investor protection in the United States. While a number of federal, self-regulatory and state securities agencies deal with cases of investment fraud, SIPC's focus is both different and narrow: Restoring funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud.
"Insurance" for investment fraud does not exist in the U.S. The Federal Trade Commission, Federal Bureau of Investigation, state securities regulators and other experts have estimated that investment fraud in the U.S. ranges from $10-$40 billion a year. In the case of microcap stock fraud, the toll on investors has been estimated as $1-3 billion annually.
With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.
It is important to understand that SIPC is not the securities world equivalent of FDIC–the Federal Deposit Insurance Corporation. Congress specifically considered creating a Federal Broker-Dealer Insurance Corporation, but lawmakers wisely concluded that such a designation would be both misleading and out of step in the risk-based investment marketplace that is so different from the world of banking.
The claims process will be developed by Mr. Roossien, the Receiver and Chapter 11 Trustee, for the Provident entities. We do not have a clear idea of when that will happen. Please monitor the Provident Royalties website at www.providentroyalties.com for future information.
 BANKRUPTCY FAQ's
• What is Chapter 11?
Chapter 11 of the U.S. Bankruptcy Code was enacted by Congress to protect companies from creditors and possible lawsuits, and to allow them to continue operating while they restructure their debt and pursue strategic options.
• Why did the Company file for Chapter 11?
We simply have too much debt in light of the dramatic and unexpected decline in energy prices, which has been amplified by the current recession. This restructuring is the best option we have to take the pressure off of our operations while we pursue the most restructuring options for our assets.
• What were the alternatives to Chapter 11?
The Company explored a number of alternatives, but determined that Chapter 11 was the most viable restructuring alternative.
• How long will this process last?
This process can last varying amounts of time, but you should recognize that this is a significant restructuring in a volatile market.
• What is the next step in the process?
Events typical to Chapter 11 filings include: the filing of a series of “first-day” motions to the court (which took place on June 22, 2009), the formation of a committee of unsecured creditors, and then a series of actions – which will be determined over time – including potential asset sales and the development of a plan to restructure our debt, create value from the assets and emerge from Chapter 11. We will be working on a plan of reorganization that best serves the interest of stakeholders as soon as possible.
• What is the current status of negotiations with the Company’s lender?
The Company is presently working with its lender, who has agreed to allow use of certain cash to fund operations.
• Who decided to file for Chapter 11 protection?
The Company’s Board of Managers made the decision.
• Where can I get more information
- http://chapter11.epiqsystems.com/providentroyaltiesllc
Impact of the Filing
• Will there be layoffs as a result of this filing?
Prior to the filing, the Company reduced headcount where there was no longer work to support. The remaining group of employees will be utilized for as long as their respective role is needed. The Company will continue to require a core group of employees to process revenue, perform accounting, finance, land and legal functions, and assist in the best option for the assets.
• What happens to the Company’s 401k plan?
The 401k plan will continue after the filing. The ultimate decision of the 401k plan’s future will be determined in the coming months as part of the Company’s plan of reorganization. Each participant vested account balance will remain invested.
• How exactly will the financial restructuring change the Company’s debt level?
The filing is the first step in the process. The answer to this question will come through the development in the case, which may include a plan of reorganization.
• What will happen to the operations of the Company after the filing?
The Company will continue to operate at the same location in the normal course of business. Its daily activities will not change for most employees.
• What is the Company doing to communicate with all of these stakeholders?
We have launched a web site dedicated to providing information about the filing and the restructuring process at http://chapter11.epiqsystems.com/providentroyaltiesllc or by a link provided on the Company’s web site.
• Will the current management team stay in place?
The management team will remain actively engaged and committed to the Company until their role is no longer necessary to improve the assets’ value. The Company has also hired a Chief Restructuring Officer (CRO), David Phelps, of Bridge Associates LLC, to assist with navigating the Company and employees through the Chapter 11 process.
• Why can’t you tell us more? Why are there so many unknowns?
This is the first step in the chapter 11 process. We will be working with many parties to resolve the outstanding questions. We will update you whenever we can, but keep in mind that this is a process and we may not have definitive answers for some time.
• If I am a supplier/vendor with unpaid invoices for goods/services rendered prior to the Ch. 11 date (i.e., pre-petition invoices), what should I do?
At the moment, you don’t need to do anything. Once the Bankruptcy Court has confirmed the procedures and deadlines for filing claims, proofs of claim forms will be mailed to the Company’s entire creditor matrix. All vendors on this matrix will receive a proof of claim form from the Company’s claims agent, Epiq Systems, Inc. This notice will also include detailed instructions about how to file a claim. http://chapter11.epiqsystems.com/providentroyaltiesllc
• If am a vendor/supplier, how do I determine my pre-petition vs. post petition balance?
The Company cannot provide current balances outstanding at this point because it is in the process of reviewing all of its records and separating pre-petition and post-petition invoices. However, within a few months, the Company will be filing a “Schedule of Assets and Liabilities” with the U.S. Bankruptcy Court. This document will list the amounts the Company believes are owed to its creditors.
• I am an investor in one of the Company’s subsidiaries, what should I do?
To the extent your rights are directly affected by actions taken in the cases, you should receive notice. The Company cannot provide legal advice to you, and therefore you should consult with your own advisors regarding this filing and any notices you receive. You will continue to receive a K-1 for 2008 once the Company files its tax
returns which have been extended. The filing will not affect the 2008 K-1’s.
• I am an investor or creditor, will I be paid what I’m owed?
Pursuant to Chapter 11 of the United States Bankruptcy Code, a debtor may not pay any creditors or make any distributions to investors for any amounts owing or accrued prior to the filing of the bankruptcy petition without the approval of the Bankruptcy Court. The Debtors as of this time have not determined if or to what extent its constituents’ may obtain a recovery in respect of claims or investments in the Debtors. Ultimately, such a determination will depend on a number of factors, including, but not limited to, factors beyond the Debtors' control. Over the coming months, the Debtors will work with the constituencies to determine the best alternative for maximizing recoveries under the circumstances. When a plan is formulated, the Debtors will provide notice of such plan, and its material terms, to all constituents as required by the Bankruptcy Court. Until that time, the Debtors will not be able to predict how much creditors and/or investors may recover.
• What are the assets and liabilities of the Debtors?
The Debtors in accordance with the Chapter 11 requirements will file a schedule of assets and liabilities and statement of financial affairs with the court on or before July 27, 2009. These schedules and statements will be posted on the Epiq web site when filed with the bankruptcy court.
FAQ's REGARDING THE MOTIONS AND FINAL ORDERS TO BE HEARD ON JULY 28, 2009
1. What is the Final Order granting Debtors’ Emergency Motion (A) Authorizing Interim and Final Use of Cash Collateral (B) Granting Adequate Protection to Prior Lienholders and (C) for Authority to Enter into Farmout Agreement (the “CC Motion”) and what will be the result if it is approved?
Substantially all of the assets of certain of the Debtors are purportedly encumbered by the security interests of Sinclair Oil and Gas Company (“Sinclair”), including the cash the Debtors have on hand to operate their business (the “Cash Collateral”). Accordingly, the Debtors must obtain permission from the Bankruptcy Court to use the Cash Collateral needed to operate their business. As a requirement to use of the Cash Collateral, the Debtors must provide Sinclair, as the Debtors’ secured lender, with “adequate protection.” In other words, the Debtors must provide Sinclair with some form of consideration to compensate it for the loss of the Cash Collateral. The CC Motion facilitates this process.
The Bankruptcy Court entered an initial “interim” order granting the CC Motion, thereby allowing the Debtors to continue to use the Cash Collateral to operate their business. The interim order will be replaced by a “Final Order” after parties-in-interest have had a chance to review and, if they deem prudent, to object to the terms of the interim order. The Final Order is binding on all parties.
Assuming the interim order becomes a Final Order, it will, among other things, (i) allow the Debtors to use the Cash Collateral in accordance with the budget prepared by the Debtors and attached to the CC Motion until the Final Order expires on August 27, 2009; (ii) stipulate that the Sinclair liens are valid, perfected, and first priority on substantially all of the assets of certain of the Debtors; and (iii) grant Sinclair “adequate protection” in the form of (y) certain post-petition liens on certain of the Debtors’ assets (which are the same assets that Sinclair possessed pre-petition liens against); and (z) the execution of that certain Farmout Agreement, which allows Sinclair to, if necessary, contest the “forced” pooling of the Debtors’ oil and gas working interests in Oklahoma.
2. What is the Final Order granting the Debtors’ Emergency Motion for Entry of (A) Order Authorizing Maintenance of Certain Bank Accounts and Continued Use of Business Forms and Checks, and (B) Interim and Final Orders Authorizing Implementation of Cash Management Procedures (the “Cash Management Motion”) and what will be the result if it is approved?
Like the with the CC Motion, the Bankruptcy Court initially granted the Cash Management Motion on an interim basis to allow the Debtors to continue to use its existing bank accounts, business forms, and checks until parties-in-interest have had an opportunity to review and, if they deemed necessary, to object to the content of Cash Management Motion.
The Final Order granting the Cash Management Motion will allow the Trustee to continue to use the Debtors’ current bank accounts, business forms, and checks, instead of being forced to open new bank accounts and to purchase new business forms and checks, which is a requisite for all Chapter 11 debtors. The Final Order granting the Cash Management will also allow the Trustee to implement a centralized cash management system, thereby creating one, comprehensive cash management system for all the Debtors instead of being forced to manage the separate bank accounts of all twenty-seven of the Debtors.
The result of the Bankruptcy Court’s approval of the Cash Management Motion is that the Trustee will be able to implement the procedures contained therein. The Bankruptcy Court’s approval of the Cash Management Motion does not impact the Debtors’ cash other than reorganizing it in a more efficient and manageable way.
3. What is the Emergency Motion for Order (A) Authorizing the Debtors to Make Adequate Assurance Payment to Utility; (B) Prohibiting Utility From Altering, Refusing, or Discontinuing Services, and (C) Establishing Procedures for Resolving Requests for Additional Assurance (the “Utilities Motion”) and what will be the result if it is approved?
The Utilities Motion ensures that the Debtors’ “utility companies” do not stop providing services to the Debtors after the Debtors filed for bankruptcy. Through the Utilities Motion, the Debtors propose to provide the Debtors’ sole utility company – XO Communications (which provides the Debtors with data and voice communications) – with “adequate assurance” that the Debtors will continue to pay XO Communications for future usage. The proposed “adequate assurance” is a deposit of one-half of the Debtors' average monthly bill from XO Communications.
The result of the Bankruptcy Court’s approval of the Utilities Motion is that XO Communications will be precluded from cutting off the data and voice communication services it provides to the Debtors, which are essential the Debtors’ business.
4. What is the Application to Employ Patton Boggs LLP as Bankruptcy Counsel (the “PB Application”) and what will be the result if it is approved?
Due to the appointment of Dennis L. Roossien, Jr. (the “Trustee”) as the chapter 11 trustee of the Debtors’ bankruptcy cases, the PB Application, in its present form, is not applicable.
Patton Boggs will be released as Debtors’ counsel only up to the time of the Trustee’s appointment.
5. What is the Application to Employ Bridge Associates, LLC Nunc Pro Tunc to the Petition Date, to Provide Interim Management and Management Assistance to the Debtors Pursuant to 11 U.S.C. § 327 (the “Bridge Application”) and what will be the result if it is approved?
The Bridge Application seeks to engage David N. Phelps of Bridge Associates, LLC, as the Debtors’ Chief Restructuring Officer (“CRO”), to manage the Debtors’ day-to-day operations and restructuring efforts.
The result of the Bankruptcy Court’s approval of the Bridge Application is that Mr. Phelps will be employed as the Debtors’ CRO and will be compensated, as set forth in the Bridge Application, by the Debtors’ bankruptcy estate. The CRO will report to and be under the direction of the Trustee.
6. What is the Application of Debtors and Debtors-in-Possession for Authority to Retain Raymond James & Associates, Inc. as Investment Banker and Financial Advisor (the “RJ Application”) and what will be the result if it is approved?
The Bridge Application seeks to engage Raymond James & Associates, Inc., an investment banking firm, to, among other things, evaluate and analyze (i) the Debtors’ business; (ii) the Debtors’ capacity to obtain financing; (iii) possible transactions the Debtors could enter into; and (iv) the Debtors’ ability to negotiate with “Stakeholders” (i.e. persons who hold claims against the Debtors’ or hold the Debtors’ debt).
The result of the Bankruptcy Court’s approval of the RJ Application is that Raymond James & Associates, Inc. will be employed as the Trustee’s financial advisor and investment banker and will be compensated, as set forth in the RJ Application, by the Debtors’ bankruptcy estate.
7. What is the Application for the Entry of an Order Pursuant to 28 U.S.C. § 156(c) Authorizing the Employment and Retention of Epiq Bankruptcy Solutions, LLC as Claims, Noticing, and Balloting Agent (the “Epiq Application”) and what will be the result if it is approved?
The Epiq Application seeks to employ Epiq Bankruptcy Solutions, LLC to act as the Trustee’s claims, noticing, and balloting agent. As the Trustee’s claim, noticing, and balloting agent, Epiq Bankruptcy Solutions, LLC will, among other things, (i) maintain up-to-date mailing lists of those parties that must be noticed of all pleadings filed in the Debtors’ bankruptcy cases; (ii) be responsible for maintaining the official claims registry for the Debtors’ bankruptcy cases; and (iii) provide balloting services in connection with the solicitation process for any chapter 11 plan.
The result of the Bankruptcy Court’s approval of the Epiq Application is that Epiq Bankruptcy Solutions, LLC will be employed as the Trustee’s claim, noticing, and balloting agent and will be compensated, as set forth in the Epiq Application, by the Debtors’ bankruptcy estate.
8. What is the Debtors' Motion for Order (I) Approving Bid Procedures Relating to Sale of Assets; (II) Scheduling a Hearing to Consider the Sale and Approving the Form and Matter of Notices; (III) Establishing Procedures Relating to Assumption and Assignment of Certain Contracts, Including Notice of Proposed Cure Amounts; (IV) Approving Deal Protection Provision; and (V) Granting Related Relief (the “Sale Procedures Motion”) and what will be the result if it is approved?
The Sale Procedures Motion sets forth the procedures to be used (i) in the effort to sell certain of the Debtors’ assets (the “Bid Procedures”); and (ii) to assume and assign certain of the Debtors’ executory contracts and unexpired leases related to those assets (the “A&A Procedures”).
The Bid Procedures state that certain of the Debtors’ assets (the “Assets”) will be sold at auction to the highest bidder. To facilitate that sale, the Bid Procedures state that Sinclair will act as the “stalking horse” for the auction. If, at the auction, another bidder out-bids Sinclair, then Sinclair will be entitled to a termination fee and may be entitled to reimbursement of its expenses related to its contemplated purchase of the Assets. If the auction does not produce a higher and better offer, then the Assets will be sold to Sinclair in accordance with the terms outlined in Sinclair’s “stalking horse” bid and in that certain Asset Purchase Agreement executed by and between the Debtors and Sinclair.
The A&A Procedures state that, as part of the sale of the Assets, certain of the Debtors’ executory contracts and unexpired leases will be assumed and assigned to Sinclair or to the highest bidder at the auction. As part of that assumption and assignment, the A&A Procedures specify that notices of proposed “cure” amounts (e.g., amounts required to remedy any monetary defaults) will be sent to the third-parties subject to the assumed contracts and leases.
The result of the Bankruptcy Court’s approval of the Sale Procedures Motion is that the Trustee will implement the Bid Procedures and the A&A Procedures to sell the Assets, subject to the Bankruptcy Court’s final approval of that sale at a subsequent hearing.
9. What is the Motion to Establish Procedures for Monthly and Interim Compensation and Reimbursement of Expenses for Professionals (the “Compensation Procedures Motion”) and what will be the result if it is approved?
The Compensation Procedures Motion sets forth the procedures by which the Trustee’s professionals will seek to be compensated for services rendered and to be reimbursed for expenses incurred. Specifically, the Compensation Procedures Motion states that the Trustee’s professionals can, at the election of each professional, submit monthly compensation and reimbursement requests in addition to the “interim fee applications” required by the Bankruptcy Code.
The result of the Bankruptcy Court’s approval of the Compensation Procedures Motion is that the procedures contained therein will dictate how and when the Trustee’s professional can seek to be compensated by the Debtors’ bankruptcy estate, subject to the reasonableness of such compensation and to the approval of the Bankruptcy Court.
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