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.”
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