Pg 1 of 5 Hearing Date and Time: June 1, 2017 at 10:30 a.m. (Eastern Time Objection Deadline: May 25, 2017 at 4:00 p.m. (Eastern Time Christopher Marcus, P.C. Mark McKane, P.C. (admitted pro hac vice Steven N. Serajeddini (admitted pro hac vice 601 Lexington Avenue 555 California Street New York, New York 10022 San Francisco, California 94104 Telephone: (212 446-4800 Telephone: (415 439-1400 Facsimile: (212 446-4900 Facsimile: (415 439-1500 Email: christopher.marcus@kirkland.com steven.serajeddini@kirkland.com Email: mark.mckane@kirkland.com Counsel to the Second Lien Group UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: Chapter 11 BREITBURN ENERGY PARTNERS, L.P., et al. Case No. 16-11390 (SMB Debtors. 1 (Jointly Administered LIMITED OBJECTION OF THE SECOND LIEN GROUP TO THE DEBTORS MOTION PURSUANT TO 11 U.S.C. 1121(d FOR FURTHER EXTENSION OF EXCLUSIVE PERIODS The ad hoc group of holders of 9.25% Senior Secured Second Lien Notes (the Second Lien Group hereby files this limited objection (the Objection to the Motion of Debtors Pursuant To 11 U.S.C. 1121(d For Further Extension of Exclusive Periods [Docket No. 1230] (the Exclusivity Motion. 2 1 2 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Breitburn Energy Partners LP (9953; Breitburn GP LLC (9948; Breitburn Operating LP (5529; Breitburn Operating GP LLC (5525; Breitburn Management Company LLC (2858; Breitburn Finance Corporation (2548; Alamitos Company (9156; Beaver Creek Pipeline, L.L.C. (7887; Breitburn Florida LLC (7424; Breitburn Oklahoma LLC (4714; Breitburn Sawtelle LLC (7661; Breitburn Transpetco GP LLC (7222; Breitburn Transpetco LP LLC (7188; GTG Pipeline LLC (3760; Mercury Michigan Company, LLC (3380; Phoenix Production Company (1427; QR Energy, LP (3069; QRE GP, LLC (2855; QRE Operating, LLC (9097; Terra Energy Company LLC (9616; Terra Pipeline Company LLC (3146; and Transpetco Pipeline Company, L.P. (2620. The Debtors mailing address is 707 Wilshire Boulevard, Suite 4600, Los Angeles, California 90017. Terms used herein and not otherwise defined shall have the meanings ascribed in the Exclusivity Motion.
Pg 2 of 5 OBJECTION 1. The time has come for the Court to end the languishing of these cases. After almost 400 days since filing, the Debtors have yet to put forth an actionable plan of reorganization, notwithstanding the patience and support of the Second Lien Group. This support has ranged from providing liquidity through funding of the second lien debt, to proposing and sponsoring actionable restructuring solutions, to supporting the Debtors failed attempts to obtain funding for a plan of reorganization. The Second Lien Group provided this support because it reasonably expected the Debtors would be capable of satisfying the Second Lien Group s claims in full in cash. But it has now become abundantly clear the Debtors are either incapable or unwilling to achieve that result, and it is time to shift the pace, direction, and outcome of these cases. 3 As a result, the Motion should be granted solely on a limited basis to provide 30 days (i.e. through June 11, 2017 for the Debtors and their partners to either commit to a path or stand aside. 2. If the Debtors ultimately fail, the Second Lien Group will have been the fulcrum in these cases. And in that case, the Second Lien Group will have needlessly borne the cost of the Debtors continuing failed efforts to put forth a successful plan. While the Second Lien Group has been willing to absorb this risk and rely on the Debtors assurances to date, it is now apparent this cooperation is leading to nothing more than repeated requests for extensions of the Exclusive Periods, without any new or reasonable justifications. At a minimum, the end of exclusivity will ensure that, with the Debtors window shrinking and their free option expiring, 3 When courts evaluate extensions of exclusivity, the primary consideration is whether adjustment of exclusivity will facilitate moving the case forward toward a fair and equitable resolution. In re Henry Mayo Newhall Mem l Hosp., 282 B.R. 444, 453 (B.A.P. 9th Cir. 2002. As succinctly stated in Adelphia, the test is better expressed as determining whether terminating exclusivity would move the case forward materially, to a degree that wouldn t otherwise be the case. See In re Adelphia Commc ns Corp., 336 B.R. 610, 590 (Bankr. S.D.N.Y. 2006, aff d, 342 B.R. 122 (S.D.N.Y. 2006. 2
Pg 3 of 5 they and their partners will have every incentive to finalize funding commitments and propose a plan. 3. Yet, even if the Debtors are successful in this respect, their work will have been in vain if the plan does not adequately account for the Second Lien Group s valid prepetition secured claim. This secured claim grows every day and is currently projected to be nearly $900 million an amount that includes a make-whole obligation acknowledged as valid by the Debtors. 4 Any attempt by the Debtors to satisfy the Second Lien Group s claim on nonconsensual terms with anything other than payment in full in cash will likely result in significant litigation and the plan s failure. If the Debtors file a plan that relies on financial engineering, unresolved claim disputes, or off-market debt instruments to attempt to account for the Second Lien Group s claim, that plan will have yet further confirmation challenges demonstrating an oversecured valuation and feasibility in this, and future, commodity markets. Unfortunately, the Debtors have provided no assurances or indications that the Second Lien Group s claim will be treated appropriately. Inexplicably, rather than substantively engaging with the Second Lien Group, the Debtors have taken an upside-down approach to chapter 11 by concentrating their efforts on the parties in the lowest reaches of the capital structure for months on end. 4. For these reasons and others, these chapter 11 cases should no longer be allowed to stagnate, at what is likely the direct expense of the Second Lien Group. The Debtors have had ample time more than a year since filing and now on their fourth exclusivity extension request to make meaningful progress in these cases, and they have failed to do so. Moreover, it is clear that they are stalled their plan efforts have been near-final for months and yet one has 4 See Oct. 14, 2016 Hr g Tr., at 35:1-4, Dkt. 701 ( That number doesn t include a make-whole claim, which we believe is valid, held by the second lien holders, Your Honor, in the amount of $140 million.. 3
Pg 4 of 5 not been filed. 5 As a result, the Motion should be granted solely on a limited basis: Any extension of the Exclusive Periods should be limited to 30 days (i.e. through June 11, 2017 to determine whether the Debtors and their partners can, once and for all, deliver an actionable and adequate restructuring plan, and, if not, to allow others to do so instead. See, e.g., In re GMG Capital Partners III, L.P., 503 B.R. 596, 601 (Bankr. S.D.N.Y. 2014 (denying motion to extend exclusivity after finding that the debtor had sufficient time to enter into good faith negotiations with its creditors but failed to do so. A firm deadline for exclusivity will hold the Debtors to their word, incentivize financing parties to put forward their best and final offers, and preserve the enterprise value of the Debtors estate for the fulcrum creditors (which could well be the Second Lien Group. The process needs the impetus. RESERVATION OF RIGHTS The Second Lien Group reserves all rights to present additional arguments and to be heard at any hearing on the Exclusivity Motion and request any further relief as may be appropriate. Further, nothing herein shall be deemed a waiver of the Second Lien Group s rights with respect to a request for an extension of the exclusive periods in the future. NOTICE Notice of this Statement has been provided to all parties in interest in accordance with the procedures set forth in the Order Pursuant to 11 U.S.C. 105(a and Fed. R. Bank. P. 1015(c, 2002(m, and 9007 Implementing Certain Notice and Case Management Procedures [Docket No.146].. 5 Nor will the Debtors be prejudiced by the denial of the full relief requested in the Exclusivity Motion. A limited extension of the Exclusive Periods in no way foreclose[s] [the debtor] from promulgating a meaningful plan of reorganization, but may merely grants other parties the right to file a chapter 11 plan alongside the Debtors. In re Grossinger s Assocs., 116 B.R. 34, 36 (Bankr. S.D.N.Y. 1990. 4
Pg 5 of 5 Dated: May 25, 2017 /s/ Christopher Marcus Christopher Marcus, P.C. Steven N. Serajeddini 601 Lexington Avenue New York, New York 10022 Telephone: (212 446-4800 Facsimile: (212 446-4900 Email: christopher.marcus@kirkland.com steven.serajeddini@kirkland.com -and- Mark McKane, P.C. 555 California Street San Francisco, California 94104 Telephone: (415 439-1400 Facsimile: (415 439-1500 Email: mark.mckane@kirkland.com Counsel to the Second Lien Group 5