Sure. Clipper Wells is a bit of a gamble so naturally any added expenses that ends up a "bust" hurts all classes and diminishes the estate.
But what a diminished estate more than likely means come confirmation time is it will effect how the Bondholders are paid back. What does that mean? The first preference in recovery for bondholders in any BK is a 100% cash recovery. They want to be made whole and they'd like it in cold hard cash. period. But if that's not possible then it opens the options up to any number of possibilities such as they may have to accept a combination of cash + new shares...or maybe another possibility would be they renegotiate the terms of the bonds at a lower interest rate and extend the due date + some cash + new shares. *And last on their list of preferences would be exchanging their entire claim for shares of newco.
Any time you can climb up the "waterfall" in a BK you're gaining a higher level of safety & success. The higher...the better.
*Sometimes this last option is exactly what some groups intend to make happen. They want to take control of a company and we may have just such a group here in the ATPG BK.
The group filed a 2019...which doesn't mean conclusively they intend to "take control" ...but they are working together which usually means that's the intent if possible.
If there are any strong arguments (aside from the Clipper Wells Project) for the legacy shareholders to be included in a Plan of Reorganization (POR) would be the debtors' Net Operating Losses (NOL's).
I haven't seen the actual official NOL number but the company said they've been losing about $1.1 Million dollars a day for the past 3 years. If you do the back of a napkin math that means there must be approx $1 Billion in NOL's.
For any new potential owners that intend to make use of those NOL's it becomes legally imperative that the POR include the legacy shareholders. 50% retained legacy ownership rules apply.
The problem is you just never know how high on the list of priority those NOL's are to a potential new owner. You can't assume they'll do whatever it takes to keep them. In the minds of us retail investors it seems like a no-brainer and we have a hard time wrapping our minds around any reasons someone wouldn't want them but surprisingly its not uncommon for new owners to sacrifice them (or extremely limit how much they can be used) in order to gain a higher controlling interest over the company.
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