ATPG Senior 11.875% 2nd Lien Bonds (fka ATPG.GE)

[romang]

By Jacqueline Palank

A bankruptcy judge on Thursday warned ATP Oil & Gas Corp. (ATPAQ) that it's not "preordained" that he'll approve the asset sale the company has long been pinning its hopes on but which has run into complications.

The remarks, from Judge Marvin Isgur of the U.S. Bankruptcy Court in Houston, came at a status conference on ATP's progress in resolving concerns about its planned sale to its lenders. The lenders, led by Credit Suisse, have offered about $690 million for ATP's deepwater drilling assets, but much of the offer is in the form of debt forgiveness instead of cash. As a result, ATP attorney Charles Kelly, of Mayer Brown LLP, said the company is concerned it won't have enough cash on hand to cover the costs of bankruptcy--what is known as being administratively insolvent--let alone pay creditors. The attorney asked Judge Isgur for suggestions as how to resolve the dilemma but got an answer he probably hadn't bargained on.

"If the estate is going to wind up administratively insolvent as a result of the 363 sale, then maybe the debtor should consider other options," Judge Isgur responded. "It's not preordained to me that it's going to get approved." The judge's comments come less than a week before ATP is scheduled to ask him to approve the sale, a deal that's been delayed as the deal has run into creditor criticism and concerns. Credit Suisse's attorney, Paul Zumbro of Cravath, Swaine & Moore LLP, said bankruptcy laws don't require buyers to cover the costs of a company's Chapter 11 case. "I don't think it's the law either," Judge Isgur said. "The question is: Is the offer good enough?" The judge then asked Mr. Zumbro if he wrong to raise that question, and Mr. Zumbro said no. "I think we're in a very challenging situation, and there aren't a lot of good options," Mr. Zumbro added. "I'm not sure what the right answer is."

ATP is scheduled to return to court next Tuesday to seek approval of the sale but must let the court know Monday whether it will need to delay that hearing as it continues sale negotiations. Based in Houston, ATP drills for natural gas and oil in such areas as the Gulf of Mexico. The company sought Chapter 11 protection last August.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com) Write to Jacqueline Palank at [e-mail]. Subscribe to WSJ: http://online.wsj.com?mod=djnwires (END) Dow Jones Newswires May 30, 2013 15:33 ET (19:33 GMT) Copyright (c) 2013 Dow Jones & Company, Inc. 053013 19:33 -- GMT Story ID: MAY302013_DJB_02e9 Keywords: BANKRUPTCY-RELATED FILINGS, CHAPTER 11 BANKRUPTCY FILINGS & CASES, CORPORATE ACTIONS, ALL COMPANY NEWS, DIVESTITURES OR ASSET SALES, CORPORATE RESTRUCTURINGS, ENERGY, INDUSTRIAL Symbols: ATPAQ, CFDAY, CSMLLP.XX