In re Ultra Petroleum Corp., CASE NO: 16–32202

CourtUnited States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas
Writing for the CourtMarvin Isgur, UNITED STATES BANKRUPTCY JUDGE
Citation575 B.R. 361
Parties IN RE: ULTRA PETROLEUM CORP., et al., Ultra Resources, Inc., Ultra Wyoming, Inc., Ultra Wyoming LGS, LLC, UP Energy Corporation, UPL Pinedale, LLC, UPL Three Rivers Holdings, LLC, Debtor(s)
Decision Date21 September 2017
Docket Number CASE NO: 16–32205, CASE NO: 16–32208, CASE NO: 16–32207, CASE NO: 16–32206, CASE NO: 16–32204,CASE NO: 16–32202, CASE NO: 16–32209 Jointly Administered

575 B.R. 361

IN RE: ULTRA PETROLEUM CORP., et al., Ultra Resources, Inc., Ultra Wyoming, Inc., Ultra Wyoming LGS, LLC, UP Energy Corporation, UPL Pinedale, LLC, UPL Three Rivers Holdings, LLC, Debtor(s)

CASE NO: 16–32202
CASE NO: 16–32204
CASE NO: 16–32205
CASE NO: 16–32206
CASE NO: 16–32207
CASE NO: 16–32208
CASE NO: 16–32209 Jointly Administered

United States Bankruptcy Court, S.D. Texas, Houston Division.

Signed September 21, 2017


575 B.R. 363

Matthew C. Fagen, Christopher T. Greco, Kirkland & Ellis LLP, New York, NY, T. Brooke Farnsworth, Farnsworth & vonBerg, Joseph G. Thompson, III, Watt Thompson Frank & Carver LLP, Houston, TX, Gregory F. Pesce, David R Seligman, Kirkland and Ellis LLP, Chicago, IL, Michael A. Petrino, Kirkland & Ellis LLP, Washington, DC, for Debtors.

Nancy Lynne Holley, Christine A. March, Office of the U.S. Trustee, Houston, TX, for U.S. Trustee.

Christopher Manuel Lopez, Alfredo R. Perez, Weil Gotshal Manges LLP, Houston, TX, for Creditor Committee.

MEMORANDUM OPINION

Marvin Isgur, UNITED STATES BANKRUPTCY JUDGE

The Ad Hoc Committee of Unsecured Creditors of Ultra Resources, Inc. (the "Senior Creditor Committee") filed a complaint against Debtors Ultra Resources ("OpCo"), Ultra Petroleum Corp. ("HoldCo"), and UP Energy Corporation ("MidCo") seeking a judgment declaring: (i) that the Debtors' filing for chapter 11 bankruptcy triggered an obligation under the terms of a Master Note Purchase Agreement (the "Note Agreement") to pay a Make–Whole Amount to certain noteholders of OpCo; and (ii) the amount of that obligation. The Debtors objected to the Senior Creditor Committee's claim for the Make–Whole Amount, post-petition interest at the contract default rate, and other related fees and expenses. Debtors' objection is denied.

Background

OpCo issued multiple series of unsecured notes (the "Notes") totaling approximately $1.46 billion pursuant to the Note Agreement dated March 6, 2008, and three Note Agreement supplements dated March 5, 2009, January 28, 2010, and October 12, 2010. (ECF No. 44 at 13; ECF No. 880 at 8; ECF No. 1215 at 15). These Notes, along with funds borrowed under the OpCo RCF Credit Agreement, are known as the "OpCo Funded Debt Claims." (ECF No. 1393 at 18). HoldCo and MidCo each guaranteed OpCo's obligations under the Note Agreement and its supplements. (ECF No. 880 at 2; ECF No. 1215–1 at 8).

Pursuant to the Note Agreement, OpCo "may, at its option, upon notice ... prepay

575 B.R. 364

... one or more series or tranches of fixed rate Notes ... at 100% of the principal amount so prepaid, plus the Make–Whole Amount determined for the prepayment date ...." (ECF No. 1215–1 at 24). Section 8.7 of the Note Agreement defines a "Make–Whole Amount" as "an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such fixed rate Note over the amount of such Called Principal ...." (ECF No. 1215–1 at 27). "Called Principal" is "the principal of such Note that ... has become or is declared to be immediately due and payable pursuant to Section 12.1 ...." (ECF No. 12151 at 27). "Remaining Scheduled Payments" includes "all payments of such Called Principal and interest thereon that would be due after the Settlement Date," which is "the date on which such Called Principal ... has become or is declared to be immediately due and payable pursuant to Section 12.1 ...." (ECF No. 1215–1 at 28). The "Discounted Value" of such Remaining Scheduled Payments is comprised of "the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respected scheduled due dates to the Settlement Date ... in accordance with accepted financial practice and at a discount factor ... equal to the Reinvestment Yield" of 0.5% over the yield to maturity of specified United States Treasury obligations. (ECF No. 1215–1 at 27).

Section 11 of the Note Agreement specifies a number of conditions constituting an "Event of Default" that consequently affects the rights of the parties under the Agreement. (ECF No. 1215–1 at 35–38). If an Event of Default occurs, Section 12.1(a) of the Note Agreement provides that "all the Notes then outstanding shall automatically become immediately due and payable." (ECF No. 1215–1 at 38). Each Note incorporates by reference the Event of Default, Acceleration, and Make–Whole Amount provisions of the Note Agreement. (ECF No. 1215–1 at 158–59). Under Paragraph (g) of Section 11, OpCo's filing of a bankruptcy petition constitutes an Event of Default. (ECF No. 1215–1 at 37).

In the event that any of the Notes become due under the Note Agreement, those Notes "mature and the entire unpaid principal amount of such Notes, plus ... all accrued and unpaid interest thereon ... [and] any applicable Make–Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law) ... shall all be immediately due and payable ...." (ECF No. 1215–1 at 38). The Note Agreement is governed by New York law. (ECF No. 1215–1 at 47).

On April 29, 2016, OpCo, MidCo, and Holdco filed chapter 11 bankruptcy petitions. (ECF No. 1). On April 30, 2016, the Court ordered the joint administration of the Debtors' bankruptcy cases under this case number. (ECF No. 40). The commencement of these chapter 11 bankruptcy cases constituted Events of Default under the Note Agreement that automatically accelerated the balance of the underlying Notes under Section 12.1. The balance following acceleration included the principal, pre-petition interest, post-petition interest, and Make–Whole Amounts. (ECF No. 1215–1 at 37, 38). Consequently, $1.46 billion of OpCo Notes became due pursuant to the Note Agreement while $999 million became due under the OpCo Notes. (ECF No. 1215 at 12).

During the course of this case, the Debtors became solvent due in part to commodity prices rising after their petition date. (ECF No. 1215 at 18). Consequently, the Debtors proposed a chapter 11 plan paying all unsecured claims, in full and in cash, and providing a substantial recovery for

575 B.R. 365

their equity owners. (ECF No. 1308; see also ECF No. 1215 at 18). The proposed chapter 11 plan treated the OpCo Noteholders as unimpaired. As holders of unimpaired claims, the Noteholders were "conclusively presumed to have accepted the plan." 11 U.S.C. § 1126(f) (emphasis added ).

The Senior Creditor Committee objected to confirmation of OpCo's proposed plan on the grounds that, for the Noteholders' claims to be unimpaired, OpCo must pay the Make–Whole Amount and post-petition interest on the OpCo Notes at the default rates listed in the Note Agreement until the Noteholders' claims are fully satisfied. (ECF No. 1393 at 25). The Senior Creditor Committee consists of senior unsecured creditors of OpCo that collectively hold or control the various OpCo Notes. (ECF No. 1393 at 14 n. 1).

The Debtors objected to the Senior Creditor Committee's asserted entitlement to the Make–Whole Amount, post-petition interest at the Note Agreement's default rate, and other related fees and expenses on March 3, 2017. (ECF No. 1214). In their memorandum in support of their objection, the Debtors specifically assert that the Senior Creditor Committee's claims for the Make–Whole Amount should be disallowed because: (i) the claims seek unmatured interest, which is expressly barred by 11 U.S.C. § 502(b)(2) ; and (ii) the Make–Whole Amount is an unenforceable liquidated damages provision under New York law. (ECF No. 1215 at 21–36).

Debtors also argue that any post-petition interest awarded on the Senior Creditor Committee's claims should be assessed, at most, at the Federal Judgment Rate because: (i) post-petition interest on unsecured claims is awarded, if at all, at the "legal rate," which is the Federal Judgment Rate; and (ii) the Court should reject the minority view that state law governs post-petition interest. (ECF No. 1215 at 36–47). Should the Court award the OpCo Noteholders both the Make–Whole Amount and post-petition interest at the contract default rate, the Debtors claim that the Noteholders' claims should be disallowed to the extent necessary to avoid a duplicative recovery. (ECF No. 1215 at 47–49). The Ad Hoc Committee of HoldCo Noteholders and the Ad Hoc Equity Committee joined in Debtors' objection. (ECF No. 1216; ECF No. 1217). The Ad Hoc Equity Committee also filed an objection to the Noteholders' claims. (ECF No. 1217).

On March 13, 2017, the Senior Creditor Committee and the Debtors entered into a stipulation. (ECF No. 1314). Pursuant to that stipulation, the parties agreed that, among other things, the quantification of post-petition interest would be addressed in conjunction with the Make–Whole Amount dispute. (ECF 1314 at 7).

The Court confirmed the Debtors' chapter 11 plan on March 14, 2017. (ECF No. 1324). The confirmation order provided that the Noteholders' claims included any amounts necessary to make the holders of the allowed claims unimpaired. (ECF No. 1324 at 69). The plan itself classified the Noteholders' claims as unimpaired and provided that the members of the Committee would receive payment of all outstanding principal on the Notes in cash, pre-petition...

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7 practice notes
  • In re Ultra Petroleum Corp., CASE NO: 16-32202
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas
    • October 26, 2020
    ...Petroleum Corp.) , 913 F.3d 533 (5th Cir. 2019) withdrawn and superseded , 943 F.3d 758 (5th Cir. 2019) ; In re Ultra Petroleum Corp. , 575 B.R. 361 (Bankr. S.D. Tex. 2017). The Court provides a brief history for clarity.This dispute stems from Ultra's 2016 chapter 11 bankruptcy case and fo......
  • Ultra Petroleum Corp. v. Ad Hoc Comm. of Unsecured Creditors of Ultra Res., Inc. (In re Ultra Petroleum Corp.), No. 17-20793
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • January 17, 2019
    ...it concluded unimpairment "requires that [creditors] receive all that they are entitled to under state law." In re Ultra Petroleum Corp. , 575 B.R. 361, 372 (Bankr. S.D. Tex. 2017). In other words, if a plan does not provide the creditor with all it would receive under state law, the credit......
  • Wells Fargo Bank, N.A. v. Hertz Corp. (In re Hertz Corp.), Case No. 20-11218 (MFW) Jointly Administered
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • December 22, 2021
    ...pay their make-whole amount or post-petition interest at their contract rate. The Bankruptcy Court agreed. In re Ultra Petroleum Corp., 575 B.R. 361, 373 (Bank. S.D. Tex. 2017). On direct appeal, the Fifth Circuit reversed, concluding that "[w]e agree with PPI, every reported decision ident......
  • Wells Fargo Bank v. The Hertz Corp. (In re The Hertz Corp.), 20-11218 MFW
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • December 22, 2021
    ...pay their make-whole amount or post-petition interest at their contract rate. The Bankruptcy Court agreed. In re Ultra Petroleum Corp., 575 B.R. 361, 373 (Bank. S.D. Tex. 2017). On direct appeal, the Fifth Circuit reversed, concluding that "[w]e agree with PPI, every reported decision ident......
  • Request a trial to view additional results
7 cases
  • In re Ultra Petroleum Corp., CASE NO: 16-32202
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas
    • October 26, 2020
    ...Petroleum Corp.) , 913 F.3d 533 (5th Cir. 2019) withdrawn and superseded , 943 F.3d 758 (5th Cir. 2019) ; In re Ultra Petroleum Corp. , 575 B.R. 361 (Bankr. S.D. Tex. 2017). The Court provides a brief history for clarity.This dispute stems from Ultra's 2016 chapter 11 bankruptcy case and fo......
  • Ultra Petroleum Corp. v. Ad Hoc Comm. of Unsecured Creditors of Ultra Res., Inc. (In re Ultra Petroleum Corp.), No. 17-20793
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • January 17, 2019
    ...it concluded unimpairment "requires that [creditors] receive all that they are entitled to under state law." In re Ultra Petroleum Corp. , 575 B.R. 361, 372 (Bankr. S.D. Tex. 2017). In other words, if a plan does not provide the creditor with all it would receive under state law, the credit......
  • Wells Fargo Bank, N.A. v. Hertz Corp. (In re Hertz Corp.), Case No. 20-11218 (MFW) Jointly Administered
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • December 22, 2021
    ...pay their make-whole amount or post-petition interest at their contract rate. The Bankruptcy Court agreed. In re Ultra Petroleum Corp., 575 B.R. 361, 373 (Bank. S.D. Tex. 2017). On direct appeal, the Fifth Circuit reversed, concluding that "[w]e agree with PPI, every reported decision ident......
  • Wells Fargo Bank v. The Hertz Corp. (In re The Hertz Corp.), 20-11218 MFW
    • United States
    • U.S. Bankruptcy Court — District of Delaware
    • December 22, 2021
    ...pay their make-whole amount or post-petition interest at their contract rate. The Bankruptcy Court agreed. In re Ultra Petroleum Corp., 575 B.R. 361, 373 (Bank. S.D. Tex. 2017). On direct appeal, the Fifth Circuit reversed, concluding that "[w]e agree with PPI, every reported decision ident......
  • Request a trial to view additional results

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