Bonanza Creek’s ad hoc committee of equity security holders filed with the U.S. Bankruptcy Court a motion for an order (i) appointing a Chapter 11 trustee, pursuant to Section 1104(a) of the Bankruptcy Code, or (ii) in the alternative, appointing an examiner, pursuant to Section 1104(c) of the Bankruptcy Code.
The motion explains, “This case marks another example of apparent collusion between a vocal group of sophisticated hedge funds and a debtor’s management team attempting to steal value from subordinated parts of a debtor’s capital structure. The diversion of value in this case is so egregious as to warrant the exceptional relief requested. The Ad Hoc Equity Committee also stands ready to engage with an independent trustee on an alternative plan that will provide more new money at a higher valuation for the benefit of all stakeholders of the Debtors… the Debtors valued the company in the $1.4 billion to $4.2 billion range (for a base case valuation) as of September 2016, the equity valuation underscoring the Disclosure Statement is only $690 million.”
In addition, “The Debtors saw fit to deliver their company to the Noteholders once they walked away from the 2016 Valuation and adopted the PWP Valuation. But what could have possibly caused Debtors’ management to take such a negative outlook of an enterprise they thought could be worth as much as $4.2 billion at year-end 2018 while oil and gas prices continued to rise? If anything, the Debtors’ value should have substantially increased above the values reflected in the 2016 Management Presentation as the commodity prices which drive the Company’s revenues have risen and the economic climate for companies in the Debtors’ industry has continued to improve. Perhaps one explanation for this shift in views regarding valuation is the fact that negotiations between the Supporting Noteholders and the Debtors resulted in a plan which delivers 10% of the New Common Stock to management under an otherwise indefensible management incentive plan (the ‘MIP’).”
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