Buckingham 28
description
Transcript of Buckingham 28
-
UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
__________________________________________ In re: ) ) Chapter 11 BUCKINGHAM OIL INTERESTS, INC. ) ) Case No.: 15-13441 (JNF) ) Debtor. ) __________________________________________)
MOTION OF THE CHAPTER 11 TRUSTEE FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING USE OF CASH COLLATERAL AND
REQUEST FOR EXPEDITED DETERMINATION
Charles A. Dale III, the duly appointed Chapter 11 Trustee for the bankruptcy estate of
the above-captioned debtor (the Chapter 11 Trustee), hereby submits this motion (the
Motion) pursuant to Section 105, 361, 362, and 363 of title 11 of the United States Code (the
Bankruptcy Code), Rules 2002, 4001, and 9014 of the Federal Rules of Bankruptcy Procedures
(the Bankruptcy Rules) and Rule 4001-2 of the Local Rules of the United States Bankruptcy
Court for the District of Massachusetts (the Local Rules) for entry of an Order (the Interim
Order)1 substantially in the form submitted herewith as Exhibit A, (i) authorizing use of cash
collateral of the Debtors prepetition lender, First Financial Bank, N.A. (First Financial) for the
purposes set forth in the Budget attached hereto as Exhibit B; (ii) granting adequate protection to
First Financial in the form of replacement liens and other protections described below; (iii)
scheduling a final hearing; and (iv) granting related relief. Further, the Chapter 11 Trustee seeks
in conjunction with such final hearing entry of a final order substantially in the form of the
Interim Order but for a longer period to be agreed upon between the Chapter 11 Trustee and First
1 Unless stated otherwise, all capitalized terms not defined herein will have the meaning ascribed to such terms in the proposed Interim Order.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 1 of 26
-
2
Financial (the Final Order). As further set forth below, the Chapter 11 Trustee seeks authority
to use cash and other receipts generated in the ordinary course of the business of Buckingham
Oil Interests, Inc. (the Debtor) to satisfy ongoing expenses. Funding each of these
expenditures is necessary to preserve and maintain the value of the Debtors assets for the benefit
of all parties in interest. Absent the use of cash collateral, the Chapter 11 Trustee will be unable
to operate the Debtors business and its prospects for reorganization will be immediately and
irreparably harmed.
The Chapter 11 Trustee, with the consent of First Financial, respectfully requests,
pursuant to Local Rule 9013-1(g)(1)(B), that the Court consider this Motion on an
expedited basis and enter the proposed Interim Order, to enable the Chapter 11 Trustee to
obtain authority to use a critical source of funds for post-petition operations.
In further support of the Motion, the Chapter 11 Trustee respectfully states as follows:
Summary of the Relief Requested
1. By the Motion, the Chapter 11 Trustee requests, pursuant to Sections 105, 361,
362, and 363 the Bankruptcy Code, Bankruptcy Rules 2002, 4001, and 9014 and Local Rule
4001-2 (a) the authority to use cash collateral and grant adequate protection to First Financial in
the form of replacement liens and the other protections described below and (b) the scheduling of
a final hearing (the Final Hearing) thereon.
2. As set forth below, First Financial is entitled to receive adequate protection to the
extent of any post-petition diminution in value of the Prepetition Collateral pursuant to Sections
361, 362, and 363 of the Bankruptcy Code. First Financial has consented to the use of the Cash
Collateral pursuant to the terms and conditions outlined in the proposed Interim Order.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 2 of 26
-
3
3. In accordance with Bankruptcy Rule 4001 and MLBR 4001-2, below is a
summary of the terms of the proposed Interim Order. Any terms that vary from the requirements
of MLBR 4001-2(c) are highlighted in bold:
(a) Prepetition Liens and Claim (i) First Financial asserts a senior secured claim in the total amount of
$1,272,655.10 as of the Petition Date. The Chapter 11 Trustee understands that First Financial is the Debtors only secured lender.
(ii) First Financial asserts a first-priority lien on certain oil and gas properties in Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and other assets related thereto (the Prepetition Collateral), including the products and proceeds thereof. The Prepetition Collateral does not represent substantially all of the Debtors assets. Due to the nature of the Prepetition Collateral, the Chapter 11 Trustee does not yet have a precise value thereof, but presently believes that First Financials Claim is at least partially secured. The Chapter 11 Trustee is reviewing the extent to which the liens granted to First Financial are perfected.
(iii) The Interim Order is without prejudice the Chapter 11 Trustee or any other party in interests right to object to First Financials Claim or to seek avoidance of the Prepetition Lien on any basis whatsoever. G, 8. Such Objection Rights must be asserted by the earlier of October 31, 2015 or the fifth business day prior to the deadline for submission of counteroffers to any proposed sale of Collateral by the Chapter 11 Trustee. 9. [This varies from the requirements of MLBR 4001-2(c)(4), (14)]. The Chapter 11 Trustee and his counsel continue to investigate the Claim, Prepetition Lien, and Prepetition Collateral.
(b) Authorization to Use Cash Collateral.
(i) Subject to the terms and conditions of the Interim Order, and in accordance with the 13-week budget attached hereto as Exhibit B (the Budget),2 the Interim Order will authorize the Chapter 11 Trustee to use Cash Collateral for the period from the Petition Date through the earlier of: (a) the date of the Final Hearing or (b) the date of an occurrence of an Event of Default (the End Date) 2
2 While First Financial has seen prior iterations of the proposed Budget, the updated one attached hereto remains subject to its final approval.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 3 of 26
-
4
(ii) The Chapter 11 Trustee may use Cash Collateral in the amounts, and for the purposes identified in the Budget (as such may be amended as provided in the Interim Order) subject to a 10% permitted variance, tested on the cumulative aggregate level of expenses authorized in the Budget each week. 3.
(iii) Over the 13-week period, the Budget contemplates that the Chapter 11 Trustee will expend approximately $404,264 in expenses. When such amount is offset against expected receipts, the Chapter 11 Trustee expects to have positive net cash flow of $314,408 by the end of such period. The Chapter 11 Trustee believes that the Budget will be adequate to pay administrative expenses that accrue during such period.
(c) Adequate Protection.
(i) The Interim Order provides that, as adequate protection for any post-
petition diminution in the value of the Prepetition Collateral from the Petition Date until the End Date, First Financial will receive replacement liens (the Postpetition Liens) in and to all property presently securing the Claim, together with any post-petition proceeds thereof. The Postpetition Lien shall not attach to causes of action or rights or recovery under Chapter 5 of the Bankruptcy Code, or the proceeds of such claims. 4.
(ii) (As further adequate protection, the Chapter 11 Trustee shall pay First
Financial $10,000 each month, which amount shall be applied in accordance with the loan documents, subject to reallocation should First Financials Allowed Secured Claim be determined to be less than the full amount of the Claim. 5.
(iii) If, notwithstanding the adequate protection granted by the Interim Order, such protection proves inadequate as a result of the stay of action against the Prepetition Collateral under section 362, the use, sale, or lease of the Prepetition Collateral under section 363, or the granting of a lien under section 364(d), First Financial shall have an allowed super-priority claim under section 507(a)(2) of the Bankruptcy Code. 6.
(iv) The Chapter 11 Trustee shall not grant or suffer to exist any lien on the Prepetition Collateral that is senior to, or pari parsu with, the Prepetition and Postpetition Liens other than liens existing on the Petition Date and replacement liens therefor granted as adequate protection with the approval of the Court upon notice to First Financial. 6. [This varies from the requirements of MLBR 4001-2(c)(9).]
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 4 of 26
-
5
(v) Following the entry of the Interim Order, the Debtor shall furnish First Financial and its counsel certain periodic reports and information. 10.
(d) Events of Default.
(i) The Interim Order provides that the occurrence of any of the following
events, unless waived by First Financial in writing, will constitute an event of default (collectively, the Events of Default): 11. 1. the Chapter 11 Trustees failure to perform any of his obligations
under the Interim Order, provided, however, that on no more than one occasion during the term of the Interim Order, the Chapter 11Trustee shall have a three-day grace period for delivery to First Financial of any report required thereby;
2. modification (without the express written consent of the Bank in its sole discretion), reversal or vacatur of this Order (but not entry of a final order granting the Motion, to the extent that such order leaves the Bank with the benefit of this Order in respect of the period from the Petition Date to the End Date); or
3. dismissal of the case, conversion of the case to a chapter 7 case, or
removal of the Chapter 11 Trustee.
(e) Rights and Remedies Upon Event of Default.
(i) The Interim Order provides that, upon the occurrence of an Event of Default, the Debtors authority to use Cash Collateral shall terminate. 11. The Interim Order, however, is without prejudice to the Chapter 11 Trustees right to seek further use of Cash Collateral beyond the End Date or First Financials right to object to same. 7.
(f) Other Provisions. (i) There is no carve-out specified in the Interim Order or Budget.
(ii) There is no choice of law provision in the Interim Order.
(iii) The Chapter 11 Trustee seeks authority to maintain and use the Debtors
pre-petition bank account at the Bank in the name and with the account numbers, Business Analysis Checking #xxxxxxx6683, as existed immediately prior to the Petition Date. 12. The Chapter 11 Trustee seeks to maintain such account only for deposits that are received through automated payments. Such amounts will be promptly moved to his newly opened trustee account.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 5 of 26
-
6
Jurisdiction and Venue
4. This Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. 157
and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). Venue
is proper in this Court pursuant to 28 U.S.C. 1408 and 1409. The statutory and legal
predicates for relief sought herein are Sections 105, 361, 362, and 363 of the Bankruptcy Code,
Bankruptcy Rules 2002, 4001, and 9014, and Local Rule 4001-2.
Background
5. On September 1, 2015 (the Petition Date), Buckingham Oil Interests, Inc. (the
Debtor) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the
Chapter 11 Case) in the United States Bankruptcy Court for the District of Massachusetts (the
Court).
6. Shortly before the Petition Date, Darryl Buckingham, the primary individual
conducting the Debtors business affairs, died. On the Petition Date, the United States Trustee
(the U.S. Trustee) moved, with the assent of the Debtor, for an order directing the appointment
of a Chapter 11 trustee. [Docket No. 2].
7. On September 1, 2015, the Court entered an order authorizing the United States
Trustee to appoint a Chapter 11 trustee to conduct the Debtors business. [Docket No. 4].
8. On September 1, 2015, the U.S. Trustee filed the Application for and Certificate
of Appointment of Chapter 11 Trustee, requesting the Courts approval of the appointment of
Charles A. Dale III as Chapter 11 Trustee (the Certificate of Appointment). [Docket No. 5].
9. On September 15, 2015, the Court entered an order approving the appointment of
the Chapter 11 Trustee. [Docket No. 19].
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 6 of 26
-
7
10. The Debtor is in the business of oil and as exploration and development. The
Debtor was incorporated in Texas, but its headquarters are located in Falmouth, Massachusetts.
Since at least 2005, the Debtor has acquired working interests in approximately 100
prospects in eleven (11) different states, including Texas and Louisiana. Within each prospect,
the Debtors operating partners (known as operators) may drill several wells in an effort to
discover oil that can be produced in commercial quantities.
11. Although the Chapter 11 Trustee has not concluded his review, it appears that the
Debtor owns a working interest in as many as 300 individual wells.
12. The Chapter 11 Trustee understands that First Financial is the Debtors only
secured lender. First Financial asserts a claim against the Debtor in the amount of $1,290,530.87
as of the Petition Date, including $1,272,655.10 of outstanding principal, $13,150.77 of accrued
interest, and $4,725.00 of late fees (the Claim).
13. First Financial asserts that the Claim is secured by a valid, perfected and non-
avoidable first-priority lien (the Prepetition Lien) upon certain oil and gas properties in
Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and
other assets related thereto (the Prepetition Collateral), including the products and proceeds
thereof (the Cash Collateral), all as more particularly described in that certain the Deed of
Trust and Security Agreement (Oil and Gas) by and among the Debtor as grantor, the Bank as
beneficiary, and two individuals as trustees executed November 19, 2014.
Relief Requested
14. By the Motion, the Chapter 11 Trustee requests, pursuant to Sections 105, 361,
362, and 363 of the Bankruptcy Code, Bankruptcy Rules 4001, and Local Rule 4001-2, that the
Court enter the Interim Order, and in conjunction with the Final Hearing the Final Order, so as to
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 7 of 26
-
8
(a) authorize the Chapter 11 Trustees (i) use of Cash Collateral in the ordinary course of the
Debtors business, in the amounts and for the purposes set forth in the Budget attached hereto and
(ii) granting of adequate protection to First Financial in the form of replacement liens and the
other protections described above, and (b) schedule the Final Hearing pursuant to Bankruptcy
Rule 4001. In addition, the Chapter 11 Trustee requests authority to maintain and use the
Debtors pre-petition bank account at First Financial,3 notwithstanding that the Guidelines
established by the Office of the United States Trustee would otherwise require all existing
accounts to be closed. The Chapter 11 Trustee seeks to maintain such account only for deposits
that are received through automated payments. Such amounts will be promptly moved to his
newly opened trustee account.
15. The expenses identified in the Budget are those incurred in the ordinary course of
the Debtors business, which are necessary to maintain the Debtors operations and, therefore,
preserve the value of the Debtors assets. Further, the Chapter 11 Trustee requests that he be
authorized to exceed, on an aggregate basis, the expenses in the Budget by no more than ten
percent (10%) (on a cumulative aggregate basis) to the extent that the Chapter 11 Trustee, in his
business judgment, determines that such overage is necessary or appropriate.
Basis for Relief
16. The Chapter 11 Trustee is currently in the process of formulating a comprehensive
strategy for the Debtors estate, which may involve the sale and/or reorganization of its business
or assets. Absent authorization from the Court to use the Cash Collateral, the Chapter 11 Trustee
does not have access to sufficient funds and will have to cease operations immediately. The use
of Cash Collateral will enable the Chapter 11 Trustee to maintain the continuity of the Debtors
3 First Financial is an authorized depository in Region 6 (Northern and Eastern Districts of Texas) http://www.justice.gov/ust-regions-r06/file/authorized_depository.pdf/download
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 8 of 26
-
9
operations, and preserve the integrity and any going concern value of the business while the
Chapter 11 Trustee pursues an exit strategy. Specifically, through the use of Cash Collateral, the
Chapter 11 Trustee will be able to satisfy the ongoing expenses, of the Debtors business absent
which he would be unable to operate the business and will be forced to liquidate, thereby
substantially devaluing its assets.
17. For the above reasons, the Chapter 11 Trustee has determined, in the exercise of
his sound business judgment, that the Chapter 11 Trustee requires the use of Cash Collateral for
the maintenance and preservation of the Debtors property, the operation of its business, the
payment of expenses attendant thereto, and the payment of the costs and expenses of
administering its chapter 11 case, all in compliance with the Budget.
I. The Use of Cash Collateral is Warranted and Should Be Approved
18. Under Section 363(c)(2) of the Bankruptcy Code, a debtor may not use cash
collateral unless:
(A) each entity that has an interest in such collateral consents; or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of [section 363].
11 U.S.C. 363(c)(2). See also In re LCC Fin. Corp., 2002 WL 31777643, at *2 (Bankr. D.
N.H. Nov. 21, 2002) (Under section 363 of the Bankruptcy Code, the Debtor is not allowed to
use cash collateral without the movants consent or an order of this Court. Section 363(e)
conditions the use of cash collateral on a finding by the Court that the movant . . . is adequately
protected.).
19. The Chapter 11 Trustee obtained the consent of First Financial to entry of the
Interim Order. If the Chapter 11 Trustee were unable to use Cash Collateral, the value of First
Financials Prepetition Collateral would be substantially reduced. First Financial will be
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 9 of 26
-
10
adequately protected through the continuous operation of the business and the resulting increase
in the value of the Debtors assets (which include the Prepetition Collateral). Use of Cash
Collateral is, therefore, critical to preserve and maintain the Debtors estate and the possibility
for consummation of a successful chapter 11 plan or an advantageous sale of assets.
20. Further, because the pre-petition bank account maintained by the Debtor at First
Financial receives automated payments from customers who purchase oil and gas from the wells
in which the Debtor has an interest, closing the bank account could create disruption and
confusion that would negatively impact the Debtors operations. For example, funds may be
held in limbo, or otherwise delayed, thus negatively affecting the Debtors accumulation of cash.
Allowing the Chapter 11 Trustees continued use of the bank account will preserve such
continuity. If the relief requested herein is granted, the Chapter 11 Trustee will not pay any
debts incurred before the Petition Date unless specifically authorized by this Court on separate
motion.
II. The Proposed Adequate Protection Should Be Approved
21. First Financial is entitled to receive adequate protection to the extent of any post-
petition diminution in value of Prepetition Collateral. Pursuant to the Interim Order, as adequate
protection, First Financial will receive replacement liens on the Prepetition Collateral and the
other protections summarized above.
22. Section 363(e) of the Bankruptcy Code provides that, on request of an entity that
has an interest in property used . . . or proposed to be used . . . by the [debtor in possession], the
court . . . will prohibit or condition such use . . . as is necessary to provide adequate protection of
such interest. 11 U.S.C. 363(e). The concept of adequate protection is not defined in the
Bankruptcy Code, but Section 361 of the Bankruptcy Code contains a non-exhaustive list of
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 10 of 26
-
11
acceptable forms of adequate protection, including a cash payment or periodic cash payments,
additional liens, replacement liens, and the indubitable equivalent of such entitys interest in
such property. 11 U.S.C. 361.
23. The purpose of adequate protection is to provide a secured creditor the benefit of
its bargain while enabling a debtor to use secured property. In re Northeast Chick Servs., Inc.,
43 B.R. 326, 332 (Bankr. D. Mass. 1984); see also In re Pawtuxet Valley Prescription & Surgical
Ctr., Inc., 2008 WL 1990887, at *2 (Bankr. D. R.I. Mar. 10, 2008) (It is generally understood
that adequate protection relates to maintaining the status quo for the period between filing the
petition and before confirmation or rejection of the plan of reorganization.).
24. In considering a request for adequate protection, the court must balance the
protection of the creditor against a debtors need for the use of property to reorganize.
The concept of adequate protection is based on two contradictory realities. One is that the use of cash collateral is essential to the success of the reorganization. The other is that the use necessarily diminishes the value of the security bargained for by the creditor, and the secured position ought not be allowed to deteriorate.
In re Xinde Intl, Inc., 13 B.R. 212, 215 (Bankr. D. Mass. 1981). Courts often consider the harm
to the debtors ultimate prospects for reorganization, which reorganization is generally to the
benefit of the secured creditors as well as to the debtor, if overly onerous adequate protection
requirements are imposed at the beginning of a case. See id. (If the court acts too swiftly and
too rigidly in requiring adequate protection, this debtors chance of reorganization may be so
severely damaged as to be non-existent.)
25. The proposed adequate protection will protect the interests of First Financial.
Accordingly, the proposed adequate protection is fair and reasonable and sufficient to satisfy the
requirements of Section 363(c)(2) of the Bankruptcy Code.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 11 of 26
-
12
III. The Interim Approval Should Be Granted
26. Bankruptcy Rule 4001(b) provides that a final hearing on a motion to use cash
collateral may not be commenced earlier than 14 days after the service of such motion. Fed. R.
Bankr. P. 4001(b). Upon request, however, the Court is empowered to conduct a preliminary
expedited hearing on the motion and authorize the use of cash collateral to the extent necessary
to avoid immediate and irreparable harm to a debtors estate pending a final hearing. Id.
27. Pursuant to Bankruptcy Rule 4001(b), the Chapter 11 Trustee requests that the
Court conduct an expedited preliminary hearing on the Motion and (a) authorize the Chapter 11
Trustee to use the Cash Collateral in order to (i) maintain and finance the ongoing operations of
the Debtor, and (ii) avoid immediate and irreparable harm and prejudice to the Debtors estate
and all parties in interest, and (b) schedule a Final Hearing on the relief requested herein.
Notice
28. As noted above, a Chapter 11 Trustee has been appointed in this case. Notice of
the Motion has been given to the following parties or, in lieu thereof, to their counsel, if known:
(a) the Office of the United States Trustee for the District of Massachusetts; (b) counsel to First
Financial; (c) the creditors holding the twenty (20) largest claims against the Debtors estate;4 (d)
the Internal Revenue Service and all known taxing authorities who may have claims against the
Debtors estate; (e) the Securities and Exchange Commission; and (f) any other parties
requesting notice. In light of the nature of the relief requested, the Chapter 11 Trustee submits
that no other or further notice need be provided.
4 On September 17, 2015, the Chapter 11 Trustee filed a List of Top 20 Unsecured Creditors [Docket No. 23]. In addition to the creditors on such list, the Chapter 11 Trustee will continue to serve certain additional parties who had been previously considered by Debtors counsel for potential inclusion thereon.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 12 of 26
-
13
Notice of Final Hearing
29. The Chapter 11 Trustee further respectfully requests that the Court schedule a
Final Hearing and authorize the Chapter 11 Trustee to serve notice of the entry of the Interim
Order and of the Final Hearing, together with a copy of the signed Interim Order and the Motion,
on (a) the parties given notice of this Motion; and (b) any party which has filed prior to the date
of entry of the Interim Order a request for notices with the Court. The Chapter 11 Trustee
requests that the Court approve such notice of the Final Hearing as sufficient notice under
Bankruptcy Rule 4001.
No Prior Request
30. No prior request for the relief sought herein has been made by the Chapter 11
Trustee to this or any other court.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 13 of 26
-
14
WHEREFORE, the Chapter 11 Trustee respectfully requests that this Court enter
an order, in substantially the form attached to the Motion as Exhibit A: (i) authorizing use of
Cash Collateral; (ii) granting replacement liens; (iii) scheduling a final hearing; and (iv) granting
such other and further relief as is just and proper.
Dated: September 18, 2015
Respectfully submitted,
CHARLES A. DALE III, CHAPTER 11 TRUSTEE By his proposed counsel,
/s/ Mackenzie L. Shea Mackenzie L. Shea (BBO No. 666241) David A. Mawhinney (BBO No. 681737) K&L Gates LLP State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 Tel: (617) 261-3100 Fax: (617) 261-3175 E-mail: [email protected] [email protected] Proposed counsel to the Chapter 11 Trustee
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 14 of 26
-
CERTIFICATION OF COMPLIANCE WITH MLBR 9013-1(g)
I, Mackenzie L. Shea, hereby certify that on the 18th of September, 2015, I contacted the
following affected party by telephone in a good faith effort to advise him on the substance of the
motion and the request for expedited determination:
First Financial Bank N.A. Daniel C. Cohn Murtha Cullina LLP 99 High Street Boston, MA 02110-2320 Email: [email protected]
First Financial consents to the Chapter 11 Trustees request for expedited determination.
September 18, 2015
/s/ Mackenzie L. Shea Mackenzie L. Shea
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 15 of 26
-
Exhibit A
Proposed Order
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 16 of 26
-
17
UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
__________________________________________ In re: ) ) Chapter 11 BUCKINGHAM OIL INTERESTS, INC. ) ) Case No.: 15-13441 (JNF) ) Debtor. ) __________________________________________)
AGREED ORDER AUTHORIZING INTERIM USE OF CASH COLLATERAL
Upon consideration of the Motion for Entry of Interim and Final Orders
Authorizing Use of Cash Collateral dated September 18, 2015, (the "Motion") filed by Charles
A. Dale III, in his capacity as Chapter 11 Trustee of Buckingham Oil Interests, Inc. (the Chapter
11 Trustee), and the Court having held an interim hearing on the Motion on September [__],
2015 (the Interim Hearing), and First Financial Bank, N.A. (the Bank) having assented to the
interim relief sought by the Motion in the form of entry of this Order; and after due deliberation
and sufficient cause appearing therefor,
THE COURT FINDS AND RULES THAT:
A. The Debtor filed a petition for relief under chapter 11 of the United States
Bankruptcy Code in this Court on September 1, 2015 (the Petition Date). That same day, the
United States Trustee filed and this Court granted an emergency motion to appoint a trustee. The
Chapter 11 Trustee was appointed on the Petition Date.
B. This Court has jurisdiction over this chapter 11 case under 28 U.S.C. Section
1334(b).
C. The Motion initiates a core proceeding pursuant to 28 U.S.C. Section 157(b)(2) as
to which this Court may issue a final order.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 17 of 26
-
18
D. The form of the Motion meets the requirements of Fed. R. Bankr. P.
4001(b)(1)(A) and (B) and MLBR 4001-2(a) and (c). Service thereof has been made in
accordance with Fed. R. Bankr. P. 4001(b)(1)(C) and MLBR 4001-2(b). Notice of the Interim
Hearing has been given in accordance with Fed. R. Bankr. P. 4001(b)(3) and MLBR 4001-2(e).
Due and adequate notice has been given to all parties entitled thereto, and no other or further
notice is necessary or required.
E. The Bank asserts a claim against the Debtor in the amount of $1,290,530.87 as of
the Petition Date, including $1,272,655.10 of outstanding principal, $13,150.77 of accrued
interest, and $4,725.00 of late fees (the Claim).
F. The Bank asserts that the Claim is secured by a valid, perfected and non-
avoidable first-priority lien (the Prepetition Lien) upon certain oil and gas properties in
Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and
other assets related thereto (the Prepetition Collateral), including the products and proceeds
thereof (the Cash Collateral), all as more particularly described in that certain the Deed of
Trust and Security Agreement (Oil and Gas) by and among the Debtor as grantor, the Bank as
beneficiary, and two individuals as trustees executed November 19, 2014.
G. The Chapter 11 Trustee has not yet completed his review of the Claim, the
Prepetition Lien, or the value of the Prepetition Collateral, and the Court has not been asked to
find, and it does not find, that the Claim or Prepetition Lien are valid, perfected, or non-
avoidable.
H. This Court has reviewed the Motion and has considered the representations of the
parties regarding the relief requested therein. The Interim Hearing was held before this Court on
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 18 of 26
-
19
September [__], 2015. At the Interim Hearing, this Court heard and considered arguments by all
parties that wished to be heard.
I. The interim relief requested in the Motion and granted hereby is necessary in
order to avoid immediate and irreparable harm pending the final hearing on the Motion
contemplated by Fed. R. Bankr. P. 4001(b)(2) (the Final Hearing), and is in the best interest of
the Debtors bankruptcy estate, its creditors and other parties in interest.
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
THAT:
1. Granting of Motion. The Motion is granted on an interim basis as set forth herein.
Any and all objections to the Motion, insofar as it seeks interim relief, are hereby overruled. All
objections to the Motion, insofar as it seeks other than interim relief, are hereby expressly
preserved to the Final Hearing, provided that any such objection must be filed by the Objection
Deadline, set forth herein.
2. Authorization to Use Cash Collateral. The Chapter 11 Trustee is authorized to
use Cash Collateral in the ordinary course of the Debtors business and solely for the purposes
set forth in the Budget annexed to the Motion as Exhibit B (the "Budget") during the period from
entry of this Order through and including the earlier of the date of the Final Hearing and the date
of occurrence of an Event of Default as defined in paragraph 12 below (the End Date).
3. Compliance with Budget. Pursuant to the preceding paragraph, the Chapter 11
Trustee may use Cash Collateral solely at the times and in the amounts specified in the Budget,
provided, however, that (a) the total funds expended by the Chapter 11 Trustee may not at any
time exceed by more than 10% the cumulative aggregate level of expenses authorized in the
Budget through the end of the week, (b) the Chapter 11 Trustee may apply any unused portion in
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 19 of 26
-
20
one week to any subsequent weekly period; and (c) the Chapter 11 Trustee may amend the
Budget with the written consent of the Bank (which the Bank may give or withhold in its sole
discretion), whereupon such amended budget shall be the Budget for purposes of this Order.
4. Replacement Lien. As adequate protection for any post-petition diminution in the
value of the Prepetition Collateral from the Petition Date to the End Date (as such End Date may
be extended by agreement of the parties or further order of the Court) (in the aggregate, the
Diminution Amount), the Bank is hereby granted a post-petition replacement lien (the
"Postpetition Lien") in and to all property presently securing the Claim, together with any post-
petition proceeds thereof. The Postpetition Lien shall attach to and be enforceable against the
same property and any post-petition proceeds thereof, to the same extent, and in the same order
of priority as the Prepetition Lien. For the avoidance of doubt, (a) the Postpetition Lien shall not
attach to causes of action or rights of recovery under chapter 5 of the Bankruptcy Code, or the
proceeds of such claims, and (b) the Bank may not foreclose or exercise any other remedy in
respect of the Prepetition or Postpetition Liens without further order of this Court.
5. Monthly Payment. As further adequate protection, the Chapter 11 Trustee shall
pay the Bank $10,000 (the Monthly Payment) on or before the 25th day of each month. The
Bank shall apply each Monthly Payment in accordance with the loan documents on which the
Claim is based, provided, however, that if the Banks claim is ultimately allowed as a secured
claim (hereinafter, the Allowed Secured Claim) in an amount less than the full amount of the
Claim, as determined by final order of this Court, the Monthly Payments shall be reallocated so
as to be applied solely to the Allowed Secured Claim, and the Bank shall refund to the Chapter
11 Trustee the amount (if any) by which the total Monthly Payments exceed the Allowed
Secured Claim.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 20 of 26
-
21
6. Super-Priority Claim. If, notwithstanding the adequate protection granted by this
Order, such protection proves inadequate as a result of the stay of action against the Prepetition
Collateral under section 362, the use, sale, or lease of the Prepetition Collateral under section
363, or the granting of a lien under section 364(d), the Bank shall have an allowed claim under
section 507(a)(2) of the Bankruptcy Code with the priority specified in section 507(d) of the
Bankruptcy Code Notwithstanding the foregoing, the Chapter 11 Trustee shall not grant or
suffer to exist any lien on the Prepetition Collateral that is senior to, or pari parsu with, the
Prepetition and PostPetition Liens other than liens existing on the Petition Date and replacement
liens therefor granted as adequate protection with the approval of this Court upon notice to the
Bank. Solely for the purposes of this paragraph 6, in determining whether, and to what extent,
the Bank may have an allowed super-priority claim, the Bank shall be deemed to have obtained
relief from the automatic stay as of September 30, 2015.
7. Reservation of Rights (Future Use of Cash Collateral). This Order shall be
without prejudice to the right of the Chapter 11 Trustee to seek, and the right of the Bank or any
other party in interest to oppose, the Chapter 11 Trustee's use of Cash Collateral beyond the End
Date.
8. Reservation of Rights (Challenge to Banks Claim and Liens). Subject to the
following paragraph, this Order shall be without prejudice to the right of the Chapter 11 Trustee
or any other party in interest to object to the Claim or to seek avoidance of the Prepetition Lien
pursuant to Chapter 5 of the Bankruptcy Code or on any other basis whatsoever (the Objection
Rights). The Postpetition Liens may be revoked or reduced to the extent that any such
avoidance, challenge or objection is successful.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 21 of 26
-
22
9. Deadline to Challenge Banks Claim or Liens Any exercise of Objection Rights
by the Chapter 11 Trustee or any party in interest shall be filed with this Court not later than 4:00
p.m. on the earlier of October 31, 2015, or the fifth business day prior to the deadline for
submission of counteroffers to any proposed sale of Collateral by the Chapter 11 Trustee, and if
not timely filed, TIME BEING OF THE ESSENCE FOR THIS PURPOSE, any such exercise of
Objection Rights shall be forever barred notwithstanding any subsequent events in this case,
including but not limited to conversion, dismissal, approval or disapproval of such sale,
occurrence or non-occurrence of the closing thereof, or confirmation of a plan. Notwithstanding
the foregoing, the Chapter 11 Trustees rights concerning the proper classification or treatment of
the Claim, the value of the PrePetition Collateral, and (if the Claim is fully secured) the correct
amount of postpetition interest, fees, costs or charges to be included in the Allowed Secured
Claim pursuant to section 506(b) of the Bankruptcy Code, shall be preserved without the need
for timely exercise of Objection Rights.
10. Financial Reports and Information. The Chapter 11 Trustee shall supply the
following reports and information to the Bank:
(a) At the end of every two-week period, the Chapter 11 Trustee shall cause to be served on the Bank a report, in a format reasonably acceptable to the Bank, comparing the Debtors actual cash receipts and disbursements through the end of the previous week to the receipts and disbursements forecast by the Budget. As soon as feasible, the Chapter 11 Trustee shall supply the Bank with a report on which receipts and disbursements since the Petition Date are attributable to the Cash Collateral, and thereafter the bi-weekly reports supplied by the Chapter 11 Trustee shall break out receipts constituting Cash Collateral and disbursements of the Chapter 11 Trustee attributable to the Cash Collateral.
1. (b) At the same time the Chapter 11 Trustee files a financial report with the United
States Trustee, the Chapter 11 Trustee shall supply a copy of such report or information to the Bank.
2. (c) The Chapter 11 Trustee will supply not later than September __, 2015, the
information on the last 12 months of oil runs previously requested by the Bank.
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 22 of 26
-
23
3. (d) If the Bank requests financial or other information from the Chapter 11 Trustee,
the Chapter 11 Trustee shall supply such information, to the extent the request therefor is reasonable, within a reasonable time.
11. Default. The Chapter 11 Trustees authority to use Cash Collateral shall
terminate upon the occurrence of any of the following events, unless waived by the Bank in
writing (each, an Event of Default):
(a) the Chapter 11 Trustees failure to perform any of his obligations under this Order, provided, however, that on no more than one occasion during the term of this Order, the Chapter 11Trustee shall have a three-day grace period for delivery to the Bank of any report required by the preceding paragraph of this Order;
(b) modification (without the express written consent of the Bank in its sole
discretion), reversal or vacatur of this Order (but not entry of a final order granting the Motion, to the extent that such order leaves the Bank with the benefit of this Order in respect of the period from the Petition Date to the End Date); or
(c) dismissal of the case, conversion of the case to a chapter 7 case, or removal of the
Chapter 11 Trustee.
12. Pre-petition Bank Accounts. The Chapter 11 Trustee is authorized, but not
directed, to maintain and use the Debtors existing bank account at the Bank in the name and
with the account numbers, Business Analysis Checking #xxxxxxx6683, as existed immediately
prior to the Petition Date. The Chapter 11 Trustee will add reference to his appointment and the
bankruptcy case number to any new checks that he may obtain or create pre-petition pursuant to
such account.
13. Final Hearing. The Final Hearing is hereby scheduled for October__, 2015 at
____ __.m. before this Court. Any objection to the Motion, or to entry of an order substantially
in the form hereof as final relief for the Chapter 11 Trustee pursuant to the Motion, shall be filed
with this Court and served upon the Chapter 11 Trustee, the United States Trustee and the Bank,
not later than 4:00 p.m. on September __, 2015 (the Objection Deadline). The Chapter 11
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 23 of 26
-
24
Trustee shall serve notice of the Final Hearing and the Objection Deadline, together with a copy
of this Order, on all persons entitled to receive notice under Fed. R. Bankr. P. 4001(b)(3) and
MLBR 4001-2(e).
BY THE COURT Dated: September ___, 2015
Honorable Joan N. Feeney United States Bankruptcy Judge
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 24 of 26
-
Exhibit B
Budget
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 25 of 26
-
Buckingham Oil Interests, IncChapter 11, Case No. 15-13441
Cash Collateral Budget
1 2 3 4 5 6 7 8 9 10 11 12 13 TOTALprepetition 9/1-9/4/2015 9/11/2015 9/18/2015 9/25/2015 10/2/2015 10/9/2015 10/16/2015 10/23/2015 10/30/2015 11/6/2015 11/13/2015 11/20/2015 11/27/2015
Cash SourcesCash Receipts 49,193.60 151,610.71 75,530.34 0.00 80,202.03 89,635.58 77,267.13 3,100.66 24,198.87 0.00 74,927.94 88,931.05 4,073.74 718,672$
TOTAL CASH SOURCES 49,194$ 151,611$ 75,530$ -$ 80,202$ 89,636$ 77,267$ 3,101$ 24,199$ -$ 74,928$ 88,931$ 4,074$ 718,672$
Cash UsesInsurance - WC 1,895 1,895 1,895 5,685$ Insurance - Medica 7,093 5,081 5,081 17,255$ Payroll - Net 19,534 16,285 35,819$ Payroll Taxes 11,081 9,397 20,478$ Rent 2,000 2,000 2,000 6,000$ Office Supplies - Other 188 312 188 312 188 1,188$ Postage 194 194 194 582$ State Income Tax Withheld 78 78 78 234$ First Financia 10,000 10,000 10,000 30,000$ Bond Premium 2,039 2,039$ Land Man 23,333 28,333 28,334 80,000$ Contingency 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 13,000$ Paint Rock expenses 45,000 45,000 45,000 135,000$
Professional fees:I-Banker -$ Debtor Counsel -$ Verdolino & Lowey -$ CH11 Trustee -$ US Trustee fees 1,000 1,000$ Claims Agent 17,666 19,778 18,541 55,985$
Total Disbursements 3,039$ 3,000$ 43,894$ 63,358$ 87,001$ 1,312$ 2,895$ 56,460$ 7,081$ 75,556$ 1,312$ 12,973$ 46,382$ 404,264$
Net Cash Flow 46,155$ 148,611$ 31,636$ (63,358)$ (6,799)$ 88,323$ 74,372$ (53,359)$ 17,118$ (75,556)$ 73,616$ 75,958$ (42,308)$ 314,408$
Beginning Cash Position 189,212$ 235,367$ 383,978$ 415,614$ 352,256$ 345,456$ 433,780$ 508,152$ 454,793$ 471,911$ 396,354$ 469,970$ 545,928$
Ending Cash Position 189,212$ 235,367$ 383,978$ 415,614$ 352,256$ 345,456$ 433,780$ 508,152$ 454,793$ 471,911$ 396,354$ 469,970$ 545,928$ 503,620$
Case 15-13441 Doc 28 Filed 09/18/15 Entered 09/18/15 17:37:02 Desc Main Document Page 26 of 26
UNITED STATES BANKRUPTCY COURTUNITED STATES BANKRUPTCY COURTAGREED ORDER AUTHORIZING INTERIM USE OF CASH COLLATERAL
BY THE COURT