The official equity holders’ committee for TVC Opus I Drilling Program LP, an affiliate of bankrupt Tri-Valley Corp. (TVLYQ), is urging the bankruptcy judge to hold off for two weeks in approving financing for the Chapter 11 reorganization begun on Aug. 7 in U.S. Bankruptcy Court in Delaware.
The Opus equity committee, appointed Sept. 15, contends the proposed loan will improperly convert $7.2 million of pre- bankruptcy debt into a post-bankruptcy loan, when Opus was never liable on the old debt. The Opus owners also don’t like having liability for $3.85 million in fresh cash because “only a portion” might be used for Opus.
The Opus owners point out that Tri-Valley is the manager of Opus under a partnership agreement. As manager, Tri-Valley isn’t an equity partner in Opus, the owners say.
If the bankruptcy judge isn’t inclined to postpone the financing hearing for two weeks beyond tomorrow’s scheduled hearing, the equity committee wants the judge to sever Opus from the loan and collateral package.
Opus is “by far” the largest unsecured creditor of Tri- Valley, resulting from millions of dollars in expenses improperly charged to Opus over the years, the equity committee said.
An oil and natural gas production and development company, Tri-Valley is scheduled to sell the assets at auctions on Oct. 17 and Dec. 5, under procedures approved on Sept. 5 by the bankruptcy court.
The company filed for Chapter 11 protection in early July, promising to sell the assets promptly. Bids are due by Oct. 10 or Oct 17, depending on which package of assets a bidder hopes to buy. A hearing to approve the sales is set for Dec. 6.
Tri-Valley, based in Bakersfield, California, has 21 wells in California and exploration rights in Alaska. The petition listed assets of $17.6 million and liabilities totaling $14.1 million.
Former Chairman G. Thomas Gamble, who is financing the bankruptcy case, is owed $7.2 million on several secured notes. There is an unsecured note for $528,000 and $9.4 million in unsecured debt owing to suppliers, according to a court filing.
Revenue in 2011 was $2.6 million, resulting in a $1.7 million net loss. In the first quarter this year, revenue of $863,000 produced a $1.5 million net loss.
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