Wednesday, June 29 2022
  • The bondholders’ lawyer questions the value of the company
  • Pipeline says it is optimistic about the financial outlook

(Reuters) – An attorney for creditors of Houston-based natural gas pipeline Ruby Pipeline LLC on Monday questioned the company’s approach to bankruptcy as it embarks on Chapter 11 proceedings without a concrete plan in place.

Creditors’ attorney Damian Schaible of Davis Polk & Wardwell said he was concerned about the role of Ruby Pipeline’s owners, Kinder Morgan Inc and Pembina Pipeline Corp, in its restructuring process at the company’s first court hearing since who filed for bankruptcy in Delaware last week.

The company sought Chapter 11 protection because it did not have enough cash on hand to pay $475 million in unsecured notes due April 1.

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However, the pipeline, which runs from Wyoming to Oregon, has enough cash (about $113 million) to continue operating through bankruptcy. Including the unsecured notes, Ruby Pipeline is about $718.9 million in debt, according to court documents.

The company blamed falling natural gas prices and the subsequent drop in demand for its services for its financial problems.

Schaible, who represents holders of unsecured notes, told US Bankruptcy Judge Craig Goldblatt during Monday’s hearing that his team is concerned that Kinder Morgan and Pembina will try to maintain control of the company as well. such as transferring what it says is hundreds of millions of dollars in cash from Ruby Pipeline to its owners over the years. He said his team would support a plan in which unsecured creditors would take over the company in exchange for releasing their debt.

Schaible also told the judge that his team believes the pipeline’s equity value may be worth less than the amount owed to noteholders, meaning the owners should not be able to retain control of the company.

Pipeline attorneys said they had been in talks with noteholders and owners in hopes of avoiding bankruptcy, but those efforts were unsuccessful. John Knight of Richards, Layton & Finger, representing Ruby Pipeline, said during the hearing that the company does not yet know the value of its assets or whether it will seek a sale, a separate reorganization or a combination of the two.

Still, another attorney for the pipeline, Daniel DeFranceschi of Richards Layton, told the judge the company believes the “cash outlook is good for this business.”

Ruby Pipeline’s next hearing before Goldblatt is scheduled for May 4.

The case is In re Ruby Pipeline LLC, US Bankruptcy Court, District of Delaware, No.22-10278.

By Ruby Pipeline: Kevin Gross, Daniel DeFranceschi, John Knight and Cory Kandestin of Richards, Layton & Finger

For Note Holders: Damian Schaible, Elliot Moskowitz, Darren Klein, and Aryeh Ethan Falk of Davis Polk & Wardwell

For Kinder Morgan: Thomas Lauria, Michael Shepherd and Jason Zakia of White & Case

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