Optim Energy Settles Bankruptcy Battle with Blackstone

Optim Energy LLC announced on Aug. 13 that the company had agreed to pay Walnut Creek Mining, the energy branch of private equity giant Blackstone Group, $5 million to settle their legal battle. According to a Wall Street Journal report, the Blackstone Group will reportedly drop its $190 million appeal of Optim’s court-approved restructuring plan as part of the new agreement.

Optim Energy accrues debt

Optim, a power plant operator, filed for Chapter 11 bankruptcy protection on Feb. 12, 2014 due to a collapse in electricity prices. The resulting 40 percent drop in prices hindered Optim’s ability to fulfill its debt repayments to Blackstone and various primary and lower-ranking creditors. Optim’s debt accumulated after it received a loan from Blackstone for the construction of a power plant and the acquisition of a facility in Texas. 

The legal battle over the approved bankruptcy plan

Walnut Creek Mining claimed that Optim’s restructuring plan was inadequate because the firm only stood to recover one percent of the debt total. Blackstone had been pursuing a $190 million claim against Optim for rejection damages from a fuel supply agreement in the previously approved plan.

One of the main issues presented in Blackstone’s appeal was that after the firm bid $126 million to acquire an Optim power plant, a price that doubled all other offers, Optim expected the firm to bid on its two other plants. However, Optim claimed that Blackstone was using Walnut Creek Mining, which supplied fuel to Optim’s power plants, to undermine its operations as a way to drive down the company’s bidding price for the plants at the bankruptcy auction.

The revised plan halts litigation

In court documents, the new plan will allow Optim to avoid making repayments on the full $713 million debt total to secured creditors. Optim officials claimed that this agreement will halt litigation with Blackstone, according to the Wall Street Journal. In turn, the deal will also stop litigation with unsecured creditors as the company agreed to distribute a portion of the power plant sales proceeds to these lower-ranking creditors. Further, unsecured creditors will now recover 95 cents on the dollar as opposed to 75 cents, as stated in the previous bankruptcy plan.  

Blackstone officials stated in court papers that the appeal will not be officially dropped until the liquidation plan for Optim’s six other bankrupt entities is approved by the court.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.