Channel: Daily Bankrupt Company Updates | Bankrupt Company News
Viewing all articles
Browse latest Browse all 4593

Ruby Pipeline, LLC – Tallgrass Affiliate Emerges Winner ($282.5mn Bid) After Competitive Auction Nets Proceeds of $40mn Above Starting Bid; Debtors Expect Proceeds to Result in Full Recovery for General Unsecured Creditors


December 16, 2022 – Further to the Court’s September 8th bidding procedures order [Docket No. 354] and an auction concluded on December 14, 2022 [Docket No. 536], the Debtor designated Tallgrass MLP Operations, LLC (“Tallgrass”) as the successful bidder ($282.5mn bid), with EP Ruby LLC (“EP Ruby”) named as the back-up bidder ($276.0mn bid) [Docket No. 543]. 

Execution versions of the investment agreements are filed at Docket Nos. 556 (Tallgrass) and 557 (EP Ruby), respectively. The sale hearing is scheduled for December 19th, with the sale expected to close during Q1 of 2023.

On December 12th, the Debtor designated the $242.0mn cash bid of Tallgrass (an affiliate of Tallgrass Energy, with press release on the acquisition here) as the "Starting Bid" at the auction which began on December 13, 2022; with Tallgrass taking over the post position from stalking horse EP Ruby (a wholly-owned subsidiary of Kinder Morgan, Inc., or “KMI”).

The Debtors' notice [Docket No. 543] provides, “Each of the Successful Bid and the Back-Up Bid will allow for, together with settlement proceeds and the Debtor’s cash on hand, payment in full of all General Unsecured Claims. In addition, the combination of such sources of consideration are sufficient to pay (a) the principal amount owed on the 2022 Unsecured Notes, (b) accrued and unpaid interest on the 2022 Unsecured Notes as of April 1, 2022 (the “Note Maturity Date”), (c) interest accruing at 8% per annum since the Note Maturity Date but not yet paid as of the closing date of the Sale Transaction on (x) the principal amount of the 2022 Unsecured Notes and (y) all accrued and unpaid interest thereon as of the Note Maturity Date and (d) payment in full of all Indenture Trustee Fees and Expenses (including the advisors jointly engaged by the Indenture Trustee and Ad Hoc Group). Moreover, the Successful Bid will provide an additional $18,500,000, and the Back-Up Bid will provide an additional $12,500,000, as applicable, to pay down either holders of Subordinated Notes Claims or Existing Equity Interests in accordance with the Plan.

Case Status

On March 31, 2022, Ruby Pipeline, LLC (“Ruby Pipeline” or the “Debtor”) filed for Chapter 11 protection with estimated assets between $500.0mn and $1.0bn; and estimated liabilities between $500.0mn and $1.0bn. At filing, the Debtor, a “midstream service provider and acts as a transporter of natural gas from the Rocky Mountain basins to the Pacific Northwest,” noted that the “driving cause of the Debtor’s bankruptcy filing is the size of its outstanding obligations under the 2022 Unsecured Notes and its current cash position. On April 1, 2022, the 2022 Unsecured Notes mature, and the Debtor is obligated to repay the $475mn in outstanding principal thereunder, as well as interest in the amount of $19mn.”

On November 18, 2022, the Debtor notified the Court that it had reached a $135.0mn settlement with Plan Sponsors Kinder Morgan and Pembina [Docket No. 452]; 

Further to that settlement, also on November 18th, the Debtor designated EP Ruby as the stalking horse bidder with a $236.0mn opening bid, of which $231.0mn is cash [Docket No. 452].

On December 1st, the U.S. Trustee assigned to the Debtor’s case objected to the Debtor's notice designating EP Ruby as the stalking horse bidder [Docket No. 480], citing the notice's proposed bidder protections. The U.S. Trustee argued that, given EP Ruby's insider status, those proposed bidder protections (a 1.75% break-up fee and expenses) are subject to a strict scrutiny standard of review, a heightened standard which the U.S. Trustee asserts has not been met. These are not "bidder protections,"' the U.S. Trustee asserts, but rather bid-chilling "blocker protections" [although the presence of Tallgrass and a bid that looks like it includes a bump equivalent to the now apparently removed bidder protections, does rather undercut the bid-chilling argument, with insight perhaps available in those investment agreements effectively sealed in the data room] that "absent extraordinary circumstances that have not been demonstrated here, should not be approved."

On December 7th, the Court agreed with the U.S. Trustee, denying EP Ruby the requested stalking horse bid protections [Docket No. 512]; with EP Ruby promptly submitting an amended and restated investment agreement, "which primarily excludes the Stalking Horse Bid Protections and related provisions from the Stalking Horse Bid."

Sale Background 

The Debtors' bidding procedures motion [Docket No. 333] states, “The Debtor, with the support of its key stakeholders, requests authorization to run a marketing process for the sale of (i) substantially all of the Debtor’s assets or (ii) the Debtor’s reorganized equity, in all cases excluding (a) cash and cash equivalents and (b) all estate causes of action, including any avoidance actions, and the proceeds derived therefrom (collectively, the ‘Company’). The Debtor has managed its restructuring with the oversight of a special committee (the ‘Special Committee’) composed solely of three (3) highly experienced and well-respected independent managers (the ‘Independent Managers’). The Independent Managers have been tasked with, among other things, directing and overseeing the Debtor’s restructuring process and this chapter 11 case, including all aspects of the sale and marketing process. In an exercise of its reasonable business judgment, the Special Committee has determined that pursuing a sale of the Company in accordance with the Bidding Procedures provides the best opportunity to maximize value for the Debtor, its estate, and its creditors

As the Court is aware, the Debtor was recently engaged in litigation with the Ad Hoc Group and Creditors’ Committee regarding, among other things, whether the Debtor’s exclusive periods to file and solicit acceptances of a chapter 11 plan (the ‘Exclusive Periods’) should be extended. Fortunately, on the eve of an exclusivity hearing, the parties were able to reach a settlement that included an agreed-upon Case Timeline. If the Debtor fails to adhere to the Case Timeline, it could jeopardize the agreement amongst the parties and lead to costly litigation once again.

The Bidding Procedures were designed with the objective of generating the greatest level of interest in, and highest or best value for, the Company while affording the Debtor maximum flexibility to execute a sale transaction as quickly and efficiently as possible. The Debtor is confident that the Bidding Procedures and the other relief requested herein will maximize recoveries for all stakeholders.”

Marketing Process

The bidding procedures motion continues, “On March 30, 2022 (effective as of March 22, 2022), the Debtor engaged PJT Partners LP (‘PJT’) to serve as its investment banker and to assist in, among other things, a sale, refinancing, or restructuring of the Debtor, which retention was approved by the Court on July 19, 2022. Since its engagement, PJT has worked with the Debtor and its advisors to prepare for a marketing and sale process of the Company (the ‘Marketing and Sale Process’). Such efforts include, but are not limited to, the finalization of an initial buyer list, the continued population of a virtual data room, and the preparation of a teaser, process letter, and confidential information memorandum. On August 15, 2022, PJT commenced an initial outreach to over 150 potential strategic and financial buyers to garner interest in pursuing a transaction for the Company (the ‘Potential Interested Parties’).

Prior to the Court’s entry of the Exclusivity Order, the Debtor, Ad Hoc Group, and Creditors’ Committee engaged in months of litigation regarding, among other things, the speed at which the Debtor’s case was progressing. The parties resolved the litigation by agreeing to the settlement embodied in the Exclusivity Order, including the Case Timeline.

Pursuant to the Exclusivity Order, the Debtor has agreed to prosecute this chapter 11 case in earnest pursuant to the Case Timeline. The Case Timeline sets forth, among other things, various milestones for the Marketing and Sale Process, which have been incorporated into the Bidding Procedures (the ‘Milestones’). Failure to adhere to the Milestones could lead to additional litigation and delay this chapter 11 case.

The Debtor believes that the Milestones set forth in the Bidding Procedures are reasonable and will provide all potential bidders with sufficient time and information to submit a bid for the Company. In formulating the procedures and time periods set forth therein, the Debtor balanced the need to provide adequate and appropriate notice to parties in interest and potential bidders with the need to timely and efficiently run a competitive Marketing and Sale process. The Bidding Procedures are designed to encourage all prospective bidders to submit bids in accordance with an adequate timeline that aims to derive the highest or best value for the benefit of all of the Debtor’s stakeholders.”

General Background

Prepetition Indebtedness

As of the Petition date, the Debtor had approximately $718.875 million outstanding in aggregate principal amount (exclusive of interest), collectively, under (a) the 2022 Unsecured Notes issued pursuant to the Indenture in 2012, (b) the 2026 Subordinated Notes issued between 2017-2021 under the 2017 Note Purchase Agreement and (c) an unsecured obligation under the Klamath Agreement in favor of the Klamath Tribes (collectively, the “Unsecured Obligations”). A breakdown of the Unsecured Obligations is shown below:

Significant Shareholders

The Debtor's direct owner is Ruby Investment Company, L.L.C. Indirect owners include Ruby Pipeline Holding Company, L.L.C.; Ruby Blocker LLC; Pembina U.S. Corporation; Veresen Energy Infrastructure No.2 Inc.; Pembina Pipeline Corporation; EP Ruby LLC; Kinder Morgan Energy Partners, L.P.; Kinder Morgan GP LLC; and Kinder Morgan, Inc.

About the Debtors

The Debtor owns and facilitates the operation of a 42-inch diameter, 683-mile-long natural gas pipeline (the “Ruby Pipeline”) originating at the Opal Hub in Opal, Wyoming and terminating at the Malin Hub in Malin, Oregon, near the California border. The Debtor is a midstream service provider and acts as a transporter of natural gas from the Rocky Mountain basins to the Pacific Northwest.

Corporate Structure

The Debtor is a Delaware limited liability company that is wholly owned by non-Debtor Ruby Investment Company, L.L.C. (“Ruby Investment”), a Delaware limited lability company, which is in turn wholly owned by Ruby Pipeline Holding Company, L.L.C. (“Ruby Holding”), a Delaware limited liability company.

The ultimate parent entities of the Debtor are (i) KMI, which acquired its equity interest in the Debtor through its acquisition of El Paso in 2012, and (ii) Pembina, which acquired its preferred equity interest in the Debtor through its acquisition of Veresen in 2017. Pembina holds its preferred equity interest in the Debtor indirectly through Ruby Holding’s Class A Preferred Units, and KMI holds its equity interest indirectly through EP Ruby LLC, a Delaware limited liability company (“EP Ruby”), which holds Ruby Holding’s Class B Common Units.

EP Ruby is the Operator and Construction Manager for the Facilities.

Read more Bankruptcy News

The post Ruby Pipeline, LLC – Tallgrass Affiliate Emerges Winner ($282.5mn Bid) After Competitive Auction Nets Proceeds of $40mn Above Starting Bid; Debtors Expect Proceeds to Result in Full Recovery for General Unsecured Creditors appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

Viewing all articles
Browse latest Browse all 4593

Latest Images

Trending Articles

click here for Latest and Popular articles on Intel Technologies

Latest Images