An ad hoc committee of equity holders in the Chapter 11 proceedings of Penn Virginia has agreed to withdraw its objection to confirmation of the company’s proposed reorganization plan and its bid for official committee status in the case, in exchange for the company’s agreement to pay the ad hoc panel’s legal fees, according to court filings.
The fees amount to $195,000 for the law firm representing the committee, LeClair Ryan.
As reported, the company’s reorganization plan does not provide any recovery for equity.
While individual creditors have filed other objections to the company’s proposed reorganization plan, the settlement effectively clears the way for confirmation of the plan, which is set for a hearing on Aug. 11.
The company said it would file an amended reorganization plan reflecting the settlement with the ad hoc committee by tomorrow.
As reported, the ad hoc panel had insisted that there was residual enterprise value in the company for equity holders, despite the company’s valuation estimates showing equity far out of the money.
The ad hoc panel filed a motion on July 14 seeking its appointment as an official committee, arguing that it needed the benefits of such status, most significantly the payment of its expenses by the company, in order to mount an effective valuation challenge to the company’s proposed reorganization plan.
But ahead of the ad hoc panel’s motion, the company preempted the group’s strategy by asking the bankruptcy court to confirm the existing plan confirmation timetable, which slated a plan confirmation hearing for Aug. 11.
The bankruptcy court issued such an order on July 6 (see “Penn Virginia’s Aug. 11 plan hearing left in place,” LCD News $). Then, two weeks later on July 20, the bankruptcy court refused to hear the ad hoc group’s motion for official status on an expedited basis, instead setting a hearing on the motion for Aug. 4, only a week before the scheduled confirmation hearing. That left the ad hoc panel in a bind, facing the possibility that it would have to run up significant costs in an effort to establish its valuation case, both for the purpose of obtaining official status and of derailing the proposed reorganization plan, without any assurance that the company would eventually cover such costs. — Alan Zimmerman
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