Laramie Wins Approval to Sponsor Delta Petroleum's Ch. 11 Plan

Hughes Hubbard & Reed won Bankruptcy Approval for client and Chapter 11 debtor Delta Petroleum Corp. to join forces with Laramie ll LLC on a reorganization plan that will create a valuable new joint venture company and raise $75 million in new financing to repay creditors.

On May 8, U.S. Bankruptcy Judge Kevin J. Carey signed off on Delta’s selection of Laramie as a so-called “plan sponsor.” Under the deal, the two natural gas exploration and development companies will form a new company called Piceance Energy LLC. Laramie will own a two-thirds stake and Delta will hold the other third.
 
Piceance will receive a $400 million secured revolving credit facility from J.P. Morgan Securities LLC and Wells Fargo Bank N.A. Delta will use $75 million of the loan to repay its creditors; Laramie will use $25 million to repay its existing bank debt.
 
Katie Coleman told Judge Carey that in addition to its stake in the joint venture, the reorganized Delta will retain other assets, including certain tax attributes and oil and gas interests outside the Piceance Basin in Colorado.
 
“This is a time of historically low commodity prices for natural gas,” she said, according to Law360. The joint venture offers “the best chance for all stakeholders to avoid being cashed out at a low value, which is unfair because we think it is a matter of timing.”
 
In December, Denver-based Delta filed for Chapter 11 bankruptcy protection. In March, Delta scrapped its planned asset sale in favor of plan sponsorship after realizing that the asset sale would not capture certain tax attributes of substantial value. Laramie won the rights to sponsor Delta’s plan during a competitive auction on April 24-25. The reorganization plan is expected to take effect in the summer.
 
In addition to Coleman, Andy Braiterman, Ned Bassen, Pat Gartland, Chris Gartman, Peter Beardsley, Ashley Laurie and Andrew Midgett are representing Delta.