Debtor Files Amended Plan and Disclosure Statement

On April 22, 2013, the Debtor filed a First Amended Chapter 11 Plan and accompanying Disclosure Statement setting forth its newly proposed treatment of creditors.  A hearing on the Disclosure Statement has been scheduled for June 6, 2013 at 10:00am in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie, with objections to the Disclosure Statement due by May 30, 2013.  Please feel free to contact us at ozgascommittee@quinnfirm.com to obtain a copy of the Debtor’s First Amended Plan and Disclosure Statement, and/or any other pleadings as filed.

Court Enters Order Granting Objections to Debtor’s Disclosure Statement, Setting Mediation

On March 7, 2013, the Court entered an Order granting the various Objections to the Debtor’s Disclosure Statement and, upon consent of Counsel, denying the Debtor’s Chapter 11 Plan.  The Court further extended the exclusivity period for the Debtor to propose and solicit a plan of reorganization until April 22, 2013, in order to allow the Debtor and RBS to work toward RBS’s crucial assent to any plan by way of mediation.  The Court’s directive with respect to mediation is subject to a key condition, in that the Debtor shall provide RBS with an audited individual net worth statement for the Debtor’s principal, Richard Osborne, on or before March 21, 2013.  Concurrently therewith, RBS shall also provide the Debtor with a detailed statement of its claims.

In the event that such statements are prepared and exchanged, the Debtor and RBS shall have commenced and concluded a mediation on or before April 8, 2013.  Any unexcused failure by Osborne to strictly comply with his obligations under the Order shall be deemed as “bad faith” and will lead to an immediate termination of the exclusivity period.

Objections Filed to Debtor’s Disclosure Statement

On or before February 28, 2013, several parties filed Objections to the Debtor's Disclosure Statement supporting its Plan of Reorganization.  The Committee filed an Objection, arguing in part that administrative claims are underestimated, the Debtor’s proposed treatment of creditors is not feasible, and the Debtor’s assets are severely depleted.  RBS filed an Objection, arguing in part that its liens are being stripped down, the Debtor’s equity holders are retaining their interests without any infusion of cash, and the Plan includes improper third-party releases.  The United States Trustee also filed an Objection, arguing in part that the financial information set forth in the Debtor’s Disclosure Statement is not adequate or feasible. 

Additionally, RBS filed a Motion for Approval of Administrative Claim seeking a superpriority administrative claim on account of its interest in the Debtor’s collateral allegedly not having been adequately protected.  The Debtor also filed a Motion to Extend Exclusive Solicitation Period with respect to the exclusive period during which it may solicit votes for its Plan, citing scheduling issues that cause the need for such an extension.

Finally, updating a previous post, the Committee's Motion for Authority to Prosecute Fraudulent Transfers was continued generally to track the Debtor's Plan confirmation process.  A hearing remains scheduled on the Debtor’s Disclosure Statement for Thursday, March 7, 2013 at 10am.

Court Denies Debtor’s Emergency Motion to Enforce the Automatic Stay against Receiver

Updating a previous post, the Court on February 27, 2013, entered an Order denying the Debtor’s Emergency Motion to Enforce the Automatic Stay (“Motion”) with respect to the efforts of the Receiver, Mark E. Dottore (“Receiver”), to collect its fees from RBS in the Northern District of Ohio.  The Court, in deciding the Motion on its merits, found that the Debtor will not be negatively affected in any significant way by the Receiver’s efforts.

An evidentiary hearing on the Receiver’s Application for Compensation filed in the Bankruptcy Court in Erie has been scheduled for Monday, May 20, 2013 at 9:30am, with a Pre-Trial Conference scheduled for Tuesday, April 30, 2013 at 9:30am.

Debtor Files Emergency Motion to Enforce Automatic Stay Against Receiver

On February 15, 2013, the Debtor filed an Emergency Motion to Enforce the Automatic Stay and Request for Expedited Hearing (“Emergency Motion”) with respect to the efforts of the previously-appointed pre-petition Receiver, Mark E. Dottore (“Receiver”), to collect its fees from RBS in the Northern District of Ohio.  The Debtor argues in part that the Receiver’s efforts violate the stay to the extent that RBS may then charge those fees back to the Debtor on account of its loan obligations.

On February 20, 2013, the Receiver filed a response indicating in part that it had specific authority from the Bankruptcy Court to proceed against RBS, and that such actions do not constitute a violation of the stay protecting the Debtor.  An expedited hearing has been scheduled for Friday, February 22, 2013 at 10am, with responses due by February 21, 2013 at 12pm.

FirstMerit, Debtor Oppose Committee’s Motion for Authority to Prosecute Fraudulent Transfers

Updating a previous post, on or about February 14, 2013, FirstMerit filed an Objection to the Committee's Motion for Authority to Prosecute Fraudulent Transfer Action (“Objection”).  The Debtor also filed a Response in Opposition to Motion for Authority to Prosecute Fraudulent Transfer Action (“Response”, and together with the Objection, “Objections”).  The Objections argue in part that authority to decide whether to pursue such litigation should remain solely with the Debtor and that the cost of pursuing such litigation is greater than the benefit to creditors in light of the Debtor’s proposed Plan of Reorganization. 

Conversely, RBS Citizens, NA s/b/m Charter One Bank, NA (“RBS”) filed a response joining with the Committee’s position.  A hearing remains scheduled for Thursday, February 21, 2013 at 10am.

Court Enters Order Approving Sale to Halcon Energy

On or about January 25, 2013, following a sale hearing, the Court entered an Order Approving Sale of Certain Oil and Gas Leases Free and Divested of Liens (“Order”) with respect to the Debtor’s sale of its Deep Rights to Halcon Energy for $10m.  Upon information and belief, the sale to Halcon has been substantially consummated, and the bulk of the sale proceeds have been paid to the Debtor’s primary secured lender, RBS Citizens, NA, d/b/a Charter One, with the exception of certain holdbacks for administrative expenses subject to further determination by the Court.  A copy of the Order is available upon request to ozgascommittee@quinnfirm.com.

As a result, the Adversary Proceeding filed by the Debtor against Halcon has been closed.