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UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS EASTERN DIVISION

In re:

)

)

Chapter 11

BUCKINGHAM OIL INTERESTS, INC.

)

)

Case No.: 15-13441 (JNF)

)

Debtor.

)

)

MOTION OF THE CHAPTER 11 TRUSTEE FOR ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING USE OF CASH COLLATERAL AND REQUEST FOR EXPEDITED DETERMINATION

Charles A. Dale III, the duly appointed Chapter 11 Trustee for the bankruptcy estate of

the above-captioned debtor (the “Chapter 11 Trustee”), hereby submits this motion (the

Motion”) pursuant to Section 105, 361, 362, and 363 of title 11 of the United States Code (the

Bankruptcy Code”), Rules 2002, 4001, and 9014 of the Federal Rules of Bankruptcy Procedures

(the “Bankruptcy Rules”) and Rule 4001-2 of the Local Rules of the United States Bankruptcy

Court for the District of Massachusetts (the “Local Rules”) for entry of an Order (the “Interim

Order”) 1 substantially in the form submitted herewith as Exhibit A, (i) authorizing use of cash

collateral of the Debtor’s prepetition lender, First Financial Bank, N.A. (“First Financial”) for the

purposes set forth in the Budget attached hereto as Exhibit B; (ii) granting adequate protection to

First Financial in the form of replacement liens and other protections described below; (iii)

scheduling a final hearing; and (iv) granting related relief. Further, the Chapter 11 Trustee seeks

in conjunction with such final hearing entry of a final order substantially in the form of the

Interim Order but for a longer period to be agreed upon between the Chapter 11 Trustee and First

1 Unless stated otherwise, all capitalized terms not defined herein will have the meaning ascribed to such terms in the proposed Interim Order.

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Financial (the “Final Order”). As further set forth below, the Chapter 11 Trustee seeks authority

to use cash and other receipts generated in the ordinary course of the business of Buckingham

Oil Interests, Inc. (the “Debtor”) to satisfy ongoing expenses. Funding each of these

expenditures is necessary to preserve and maintain the value of the Debtor’s assets for the benefit

of all parties in interest. Absent the use of cash collateral, the Chapter 11 Trustee will be unable

to operate the Debtor’s business and its prospects for reorganization will be immediately and

irreparably harmed.

The Chapter 11 Trustee, with the consent of First Financial, respectfully requests,

pursuant to Local Rule 9013-1(g)(1)(B), that the Court consider this Motion on an

expedited basis and enter the proposed Interim Order, to enable the Chapter 11 Trustee to

obtain authority to use a critical source of funds for post-petition operations.

In further support of the Motion, the Chapter 11 Trustee respectfully states as follows:

Summary of the Relief Requested

1. By the Motion, the Chapter 11 Trustee requests, pursuant to Sections 105, 361,

362, and 363 the Bankruptcy Code, Bankruptcy Rules 2002, 4001, and 9014 and Local Rule

4001-2 (a) the authority to use cash collateral and grant adequate protection to First Financial in

the form of replacement liens and the other protections described below and (b) the scheduling of

a final hearing (the “Final Hearing”) thereon.

2. As set forth below, First Financial is entitled to receive adequate protection to the

extent of any post-petition diminution in value of the Prepetition Collateral pursuant to Sections

361, 362, and 363 of the Bankruptcy Code. First Financial has consented to the use of the Cash

Collateral pursuant to the terms and conditions outlined in the proposed Interim Order.

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3. In accordance with Bankruptcy Rule 4001 and MLBR 4001-2, below is a

summary of the terms of the proposed Interim Order. Any terms that vary from the requirements

of MLBR 4001-2(c) are highlighted in bold:

(a)

Prepetition Liens and Claim

(i)

First Financial asserts a senior secured claim in the total amount of $1,272,655.10 as of the Petition Date. The Chapter 11 Trustee understands that First Financial is the Debtor’s only secured lender.

(ii)

First Financial asserts a first-priority lien on certain oil and gas properties in Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and other assets related thereto (the “Prepetition Collateral”), including the products and proceeds thereof. The Prepetition Collateral does not represent substantially all of the Debtor’s assets. Due to the nature of the Prepetition Collateral, the Chapter 11 Trustee does not yet have a precise value thereof, but presently believes that First Financial’s Claim is at least partially secured. The Chapter 11 Trustee is reviewing the extent to which the liens granted to First Financial are perfected.

(iii)

The Interim Order is without prejudice the Chapter 11 Trustee or any other party in interest’s right to object to First Financial’s Claim or to seek avoidance of the Prepetition Lien on any basis whatsoever. ¶G, 8. Such Objection Rights must be asserted by the earlier of October 31, 2015 or the fifth business day prior to the deadline for submission of counteroffers to any proposed sale of Collateral by the Chapter 11 Trustee. ¶9. [This varies from the requirements of MLBR 4001-2(c)(4), (14)]. The Chapter 11 Trustee and his counsel continue to investigate the Claim, Prepetition Lien, and Prepetition Collateral.

(b)

Authorization to Use Cash Collateral.

(i) Subject to the terms and conditions of the Interim Order, and in accordance with the 13-week budget attached hereto as Exhibit B (the “Budget”), 2 the Interim Order will authorize the Chapter 11 Trustee to use Cash Collateral for the period from the Petition Date through the earlier of: (a) the date of the Final Hearing or (b) the date of an occurrence of an Event of Default (the “End Date”) ¶ 2

2 While First Financial has seen prior iterations of the proposed Budget, the updated one attached hereto remains subject to its final approval.

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(ii)

The Chapter 11 Trustee may use Cash Collateral in the amounts, and for the purposes identified in the Budget (as such may be amended as provided in the Interim Order) subject to a 10% permitted variance, tested on the cumulative aggregate level of expenses authorized in the Budget each week. ¶ 3.

(iii)

Over the 13-week period, the Budget contemplates that the Chapter 11 Trustee will expend approximately $404,264 in expenses. When such amount is offset against expected receipts, the Chapter 11 Trustee expects to have positive net cash flow of $314,408 by the end of such period. The Chapter 11 Trustee believes that the Budget will be adequate to pay administrative expenses that accrue during such period.

(c) Adequate Protection.

(i)

The Interim Order provides that, as adequate protection for any post- petition diminution in the value of the Prepetition Collateral from the Petition Date until the End Date, First Financial will receive replacement liens (the “Postpetition Liens”) in and to all property presently securing the Claim, together with any post-petition proceeds thereof. The Postpetition Lien shall not attach to causes of action or rights or recovery under Chapter 5 of the Bankruptcy Code, or the proceeds of such claims.

¶4.

(ii)

(As further adequate protection, the Chapter 11 Trustee shall pay First Financial $10,000 each month, which amount shall be applied in accordance with the loan documents, subject to reallocation should First Financial’s Allowed Secured Claim be determined to be less than the full amount of the Claim. ¶5.

(iii)

If, notwithstanding the adequate protection granted by the Interim Order, such protection proves inadequate as a result of the stay of action against the Prepetition Collateral under section 362, the use, sale, or lease of the Prepetition Collateral under section 363, or the granting of a lien under section 364(d), First Financial shall have an allowed “super-priority” claim under section 507(a)(2) of the Bankruptcy Code. ¶6.

(iv)

The Chapter 11 Trustee shall not grant or suffer to exist any lien on the Prepetition Collateral that is senior to, or pari parsu with, the Prepetition and Postpetition Liens other than liens existing on the Petition Date and replacement liens therefor granted as adequate protection with the approval of the Court upon notice to First Financial. ¶6. [This varies from the requirements of MLBR 4001-

2(c)(9).]

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(v) Following the entry of the Interim Order, the Debtor shall furnish First Financial and its counsel certain periodic reports and information. ¶10.

(d)

Events of Default.

 

(i)

The Interim Order provides that the occurrence of any of the following events, unless waived by First Financial in writing, will constitute an event of default (collectively, the “Events of Default”): ¶11.

 

1. the Chapter 11 Trustee’s failure to perform any of his obligations under the Interim Order, provided, however, that on no more than one occasion during the term of the Interim Order, the Chapter 11Trustee shall have a three-day grace period for delivery to First Financial of any report required thereby;

2. modification (without the express written consent of the Bank in its sole discretion), reversal or vacatur of this Order (but not entry of a final order granting the Motion, to the extent that such order leaves the Bank with the benefit of this Order in respect of the period from the Petition Date to the End Date); or

3. dismissal of the case, conversion of the case to a chapter 7 case, or removal of the Chapter 11 Trustee.

(e)

Rights and Remedies Upon Event of Default.

(i)

The Interim Order provides that, upon the occurrence of an Event of

 

Default, the Debtor’s authority to use Cash Collateral shall terminate.

¶11.

The Interim Order, however, is without prejudice to the Chapter 11

Trustee’s right to seek further use of Cash Collateral beyond the End Date or First Financial’s right to object to same. ¶7.

(f)

Other Provisions.

 

(i)

There is no carve-out specified in the Interim Order or Budget.

(ii)

There is no choice of law provision in the Interim Order.

(iii)

The Chapter 11 Trustee seeks authority to maintain and use the Debtor’s pre-petition bank account at the Bank in the name and with the account numbers, Business Analysis Checking #xxxxxxx6683, as existed immediately prior to the Petition Date. ¶12. The Chapter 11 Trustee seeks to maintain such account only for deposits that are received through automated payments. Such amounts will be promptly moved to his newly opened trustee account.

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Jurisdiction and Venue

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4. This Court has jurisdiction to consider the Motion pursuant to 28 U.S.C. §§ 157

and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). Venue

is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. The statutory and legal

predicates for relief sought herein are Sections 105, 361, 362, and 363 of the Bankruptcy Code,

Bankruptcy Rules 2002, 4001, and 9014, and Local Rule 4001-2.

Background

5. On September 1, 2015 (the “Petition Date”), Buckingham Oil Interests, Inc. (the

Debtor”) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the

Chapter 11 Case”) in the United States Bankruptcy Court for the District of Massachusetts (the

Court”).

6. Shortly before the Petition Date, Darryl Buckingham, the primary individual

conducting the Debtor’s business affairs, died. On the Petition Date, the United States Trustee

(the “U.S. Trustee”) moved, with the assent of the Debtor, for an order directing the appointment

of a Chapter 11 trustee. [Docket No. 2].

7. On September 1, 2015, the Court entered an order authorizing the United States

Trustee to appoint a Chapter 11 trustee to conduct the Debtor’s business. [Docket No. 4].

8. On September 1, 2015, the U.S. Trustee filed the Application for and Certificate

of Appointment of Chapter 11 Trustee, requesting the Court’s approval of the appointment of

Charles A. Dale III as Chapter 11 Trustee (the “Certificate of Appointment”). [Docket No. 5].

9. On September 15, 2015, the Court entered an order approving the appointment of

the Chapter 11 Trustee. [Docket No. 19].

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10. The Debtor is in the business of oil and as exploration and development. The

Debtor was incorporated in Texas, but its headquarters are located in Falmouth, Massachusetts.

Since at least 2005, the Debtor has acquired “working interests” in approximately 100

“prospects” in eleven (11) different states, including Texas and Louisiana. Within each prospect,

the Debtor’s operating partners (known as “operators”) may drill several wells in an effort to

discover oil that can be produced in commercial quantities.

11. Although the Chapter 11 Trustee has not concluded his review, it appears that the

Debtor owns a working interest in as many as 300 individual wells.

12. The Chapter 11 Trustee understands that First Financial is the Debtor’s only

secured lender. First Financial asserts a claim against the Debtor in the amount of $1,290,530.87

as of the Petition Date, including $1,272,655.10 of outstanding principal, $13,150.77 of accrued

interest, and $4,725.00 of late fees (the “Claim”).

13. First Financial asserts that the Claim is secured by a valid, perfected and non-

avoidable first-priority lien (the “Prepetition Lien”) upon certain oil and gas properties in

Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and

other assets related thereto (the “Prepetition Collateral”), including the products and proceeds

thereof (the “Cash Collateral”), all as more particularly described in that certain the Deed of

Trust and Security Agreement (Oil and Gas) by and among the Debtor as grantor, the Bank as

beneficiary, and two individuals as trustees executed November 19, 2014.

Relief Requested

14. By the Motion, the Chapter 11 Trustee requests, pursuant to Sections 105, 361,

362, and 363 of the Bankruptcy Code, Bankruptcy Rules 4001, and Local Rule 4001-2, that the

Court enter the Interim Order, and in conjunction with the Final Hearing the Final Order, so as to

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(a) authorize the Chapter 11 Trustee’s (i) use of Cash Collateral in the ordinary course of the

Debtor’s business, in the amounts and for the purposes set forth in the Budget attached hereto and

(ii) granting of adequate protection to First Financial in the form of replacement liens and the

other protections described above, and (b) schedule the Final Hearing pursuant to Bankruptcy

Rule 4001. In addition, the Chapter 11 Trustee requests authority to maintain and use the

Debtor’s pre-petition bank account at First Financial, 3 notwithstanding that the Guidelines

established by the Office of the United States Trustee would otherwise require all existing

accounts to be closed. The Chapter 11 Trustee seeks to maintain such account only for deposits

that are received through automated payments. Such amounts will be promptly moved to his

newly opened trustee account.

15. The expenses identified in the Budget are those incurred in the ordinary course of

the Debtor’s business, which are necessary to maintain the Debtor’s operations and, therefore,

preserve the value of the Debtor’s assets. Further, the Chapter 11 Trustee requests that he be

authorized to exceed, on an aggregate basis, the expenses in the Budget by no more than ten

percent (10%) (on a cumulative aggregate basis) to the extent that the Chapter 11 Trustee, in his

business judgment, determines that such overage is necessary or appropriate.

Basis for Relief

16. The Chapter 11 Trustee is currently in the process of formulating a comprehensive

strategy for the Debtor’s estate, which may involve the sale and/or reorganization of its business

or assets. Absent authorization from the Court to use the Cash Collateral, the Chapter 11 Trustee

does not have access to sufficient funds and will have to cease operations immediately. The use

of Cash Collateral will enable the Chapter 11 Trustee to maintain the continuity of the Debtor’s

3 First Financial is an authorized depository in Region 6 (Northern and Eastern Districts of Texas)

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operations, and preserve the integrity and any going concern value of the business while the

Chapter 11 Trustee pursues an exit strategy. Specifically, through the use of Cash Collateral, the

Chapter 11 Trustee will be able to satisfy the ongoing expenses, of the Debtor’s business absent

which he would be unable to operate the business and will be forced to liquidate, thereby

substantially devaluing its assets.

17. For the above reasons, the Chapter 11 Trustee has determined, in the exercise of

his sound business judgment, that the Chapter 11 Trustee requires the use of Cash Collateral for

the maintenance and preservation of the Debtor’s property, the operation of its business, the

payment of expenses attendant thereto, and the payment of the costs and expenses of

administering its chapter 11 case, all in compliance with the Budget.

I. The Use of Cash Collateral is Warranted and Should Be Approved

18. Under Section 363(c)(2) of the Bankruptcy Code, a debtor may not use “cash

collateral” unless:

(A) each entity that has an interest in such collateral consents; or

(B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of [section 363].

11 U.S.C. § 363(c)(2). See also In re LCC Fin. Corp., 2002 WL 31777643, at *2 (Bankr. D.

N.H. Nov. 21, 2002) (“Under section 363 of the Bankruptcy Code, the Debtor is not allowed to

use cash collateral without the movant’s consent or an order of this Court. Section 363(e)

conditions the use of cash collateral on a finding by the Court that the movant

protected.”).

is adequately

19. The Chapter 11 Trustee obtained the consent of First Financial to entry of the

Interim Order. If the Chapter 11 Trustee were unable to use Cash Collateral, the value of First

Financial’s Prepetition Collateral would be substantially reduced. First Financial will be

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adequately protected through the continuous operation of the business and the resulting increase

in the value of the Debtor’s assets (which include the Prepetition Collateral). Use of Cash

Collateral is, therefore, critical to preserve and maintain the Debtor’s estate and the possibility

for consummation of a successful chapter 11 plan or an advantageous sale of assets.

20. Further, because the pre-petition bank account maintained by the Debtor at First

Financial receives automated payments from customers who purchase oil and gas from the wells

in which the Debtor has an interest, closing the bank account could create disruption and

confusion that would negatively impact the Debtor’s operations. For example, funds may be

held in limbo, or otherwise delayed, thus negatively affecting the Debtor’s accumulation of cash.

Allowing the Chapter 11 Trustee’s continued use of the bank account will preserve such

continuity. If the relief requested herein is granted, the Chapter 11 Trustee will not pay any

debts incurred before the Petition Date unless specifically authorized by this Court on separate

motion.

II.

The Proposed Adequate Protection Should Be Approved

21. First Financial is entitled to receive adequate protection to the extent of any post-

petition diminution in value of Prepetition Collateral. Pursuant to the Interim Order, as adequate

protection, First Financial will receive replacement liens on the Prepetition Collateral and the

other protections summarized above.

22. Section 363(e) of the Bankruptcy Code provides that, “on request of an entity that

has an interest in property used

or proposed to be used

by the [debtor in possession], the

court

will prohibit or condition such use

as is necessary to provide adequate protection of

such interest.” 11 U.S.C. § 363(e).

The concept of “adequate protection” is not defined in the

Bankruptcy Code, but Section 361 of the Bankruptcy Code contains a non-exhaustive list of

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acceptable forms of adequate protection, including a cash payment or periodic cash payments,

additional liens, replacement liens, and the “indubitable equivalent of such entity’s interest in

such property.” 11 U.S.C. § 361.

23. “The purpose of adequate protection is to provide a secured creditor the benefit of

its bargain while enabling a debtor to use secured property.” In re Northeast Chick Servs., Inc.,

43 B.R. 326, 332 (Bankr. D. Mass. 1984); see also In re Pawtuxet Valley Prescription & Surgical

Ctr., Inc., 2008 WL 1990887, at *2 (Bankr. D. R.I. Mar. 10, 2008) (“It is generally understood

that adequate protection relates to maintaining the status quo for the period between filing the

petition and before confirmation or rejection of the plan of reorganization.”).

24. In considering a request for adequate protection, the court must balance the

protection of the creditor against a debtor’s need for the use of property to reorganize.

The concept of adequate protection is based on two contradictory realities. One is that the use of cash collateral is essential to the success of the reorganization. The other is that the use necessarily diminishes the value of the security bargained for by the creditor, and the secured position ought not be allowed to deteriorate.

In re Xinde Int’l, Inc., 13 B.R. 212, 215 (Bankr. D. Mass. 1981). Courts often consider the harm

to the debtor’s ultimate prospects for reorganization, which reorganization is generally to the

benefit of the secured creditors as well as to the debtor, if overly onerous adequate protection

requirements are imposed at the beginning of a case. See id. (“If the court acts too swiftly and

too rigidly in requiring adequate protection, this debtor’s chance of reorganization may be so

severely damaged as to be non-existent.”)

25. The proposed adequate protection will protect the interests of First Financial.

Accordingly, the proposed adequate protection is fair and reasonable and sufficient to satisfy the

requirements of Section 363(c)(2) of the Bankruptcy Code.

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III. The Interim Approval Should Be Granted

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26. Bankruptcy Rule 4001(b) provides that a final hearing on a motion to use cash

collateral may not be commenced earlier than 14 days after the service of such motion. Fed. R.

Bankr. P. 4001(b). Upon request, however, the Court is empowered to conduct a preliminary

expedited hearing on the motion and authorize the use of cash collateral to the extent necessary

to avoid immediate and irreparable harm to a debtor’s estate pending a final hearing. Id.

27. Pursuant to Bankruptcy Rule 4001(b), the Chapter 11 Trustee requests that the

Court conduct an expedited preliminary hearing on the Motion and (a) authorize the Chapter 11

Trustee to use the Cash Collateral in order to (i) maintain and finance the ongoing operations of

the Debtor, and (ii) avoid immediate and irreparable harm and prejudice to the Debtor’s estate

and all parties in interest, and (b) schedule a Final Hearing on the relief requested herein.

Notice

28. As noted above, a Chapter 11 Trustee has been appointed in this case. Notice of

the Motion has been given to the following parties or, in lieu thereof, to their counsel, if known:

(a) the Office of the United States Trustee for the District of Massachusetts; (b) counsel to First

Financial; (c) the creditors holding the twenty (20) largest claims against the Debtor’s estate; 4 (d)

the Internal Revenue Service and all known taxing authorities who may have claims against the

Debtor’s estate; (e) the Securities and Exchange Commission; and (f) any other parties

requesting notice. In light of the nature of the relief requested, the Chapter 11 Trustee submits

that no other or further notice need be provided.

4 On September 17, 2015, the Chapter 11 Trustee filed a List of Top 20 Unsecured Creditors [Docket No. 23]. In addition to the creditors on such list, the Chapter 11 Trustee will continue to serve certain additional parties who had been previously considered by Debtor’s counsel for potential inclusion thereon.

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Notice of Final Hearing

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29. The Chapter 11 Trustee further respectfully requests that the Court schedule a

Final Hearing and authorize the Chapter 11 Trustee to serve notice of the entry of the Interim

Order and of the Final Hearing, together with a copy of the signed Interim Order and the Motion,

on (a) the parties given notice of this Motion; and (b) any party which has filed prior to the date

of entry of the Interim Order a request for notices with the Court. The Chapter 11 Trustee

requests that the Court approve such notice of the Final Hearing as sufficient notice under

Bankruptcy Rule 4001.

No Prior Request

30. No prior request for the relief sought herein has been made by the Chapter 11

Trustee to this or any other court.

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WHEREFORE, the Chapter 11 Trustee respectfully requests that this Court enter

an order, in substantially the form attached to the Motion as Exhibit A: (i) authorizing use of

Cash Collateral; (ii) granting replacement liens; (iii) scheduling a final hearing; and (iv) granting

such other and further relief as is just and proper.

Dated: September 18, 2015

Respectfully submitted,

CHARLES A. DALE III, CHAPTER 11 TRUSTEE

By his proposed counsel,

/s/ Mackenzie L. Shea

Mackenzie L. Shea (BBO No. 666241) David A. Mawhinney (BBO No. 681737) K&L Gates LLP State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 Tel: (617) 261-3100 Fax: (617) 261-3175

E-mail:

Proposed counsel to the Chapter 11 Trustee

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CERTIFICATION OF COMPLIANCE WITH MLBR 9013-1(g)

I, Mackenzie L. Shea, hereby certify that on the 18th of September, 2015, I contacted the

following affected party by telephone in a good faith effort to advise him on the substance of the

motion and the request for expedited determination:

First Financial Bank N.A. Daniel C. Cohn Murtha Cullina LLP 99 High Street Boston, MA 02110-2320 Email: dcohn@muthalaw.com

First Financial consents to the Chapter 11 Trustee’s request for expedited determination.

September 18, 2015

/s/ Mackenzie L. Shea

Mackenzie L. Shea

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Exhibit A

Proposed Order

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UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS EASTERN DIVISION

In re:

)

)

Chapter 11

BUCKINGHAM OIL INTERESTS, INC.

)

)

Case No.: 15-13441 (JNF)

)

Debtor.

)

)

AGREED ORDER AUTHORIZING INTERIM USE OF CASH COLLATERAL

Upon

consideration

of

the Motion

for Entry of

Interim

and

Final

Orders

Authorizing Use of Cash Collateral dated September 18, 2015, (the "Motion") filed by Charles

A. Dale III, in his capacity as Chapter 11 Trustee of Buckingham Oil Interests, Inc. (the “Chapter

11 Trustee”), and the Court having held an interim hearing on the Motion on September [

],

2015 (the “Interim Hearing”), and First Financial Bank, N.A. (the “Bank”) having assented to the

interim relief sought by the Motion in the form of entry of this Order; and after due deliberation

and sufficient cause appearing therefor,

THE COURT FINDS AND RULES THAT:

A. The Debtor filed a petition for relief under chapter 11 of the United States

Bankruptcy Code in this Court on September 1, 2015 (the “Petition Date”). That same day, the

United States Trustee filed and this Court granted an emergency motion to appoint a trustee. The

Chapter 11 Trustee was appointed on the Petition Date.

B. This Court has jurisdiction over this chapter 11 case under 28 U.S.C. Section

1334(b).

C. The Motion initiates a core proceeding pursuant to 28 U.S.C. Section 157(b)(2) as

to which this Court may issue a final order.

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D.

The

form

of

the

Motion

meets

the

requirements

of

Fed.

R.

Bankr.

P.

4001(b)(1)(A) and (B) and MLBR 4001-2(a) and (c).

Service thereof has been made in

accordance with Fed. R. Bankr. P. 4001(b)(1)(C) and MLBR 4001-2(b).

Notice of the Interim

Hearing has been given in accordance with Fed. R. Bankr. P. 4001(b)(3) and MLBR 4001-2(e).

Due and adequate notice has been given to all parties entitled thereto, and no other or further

notice is necessary or required.

E. The Bank asserts a claim against the Debtor in the amount of $1,290,530.87 as of

the Petition Date, including $1,272,655.10 of outstanding principal, $13,150.77 of accrued

interest, and $4,725.00 of late fees (the “Claim”).

F. The Bank asserts that the Claim is secured by a valid, perfected and non-

avoidable first-priority lien (the “Prepetition Lien”) upon certain oil and gas properties in

Menard County, Texas, along with equipment, production contracts, severed hydrocarbons and

other assets related thereto (the “Prepetition Collateral”), including the products and proceeds

thereof (the “Cash Collateral”), all as more particularly described in that certain the Deed of

Trust and Security Agreement (Oil and Gas) by and among the Debtor as grantor, the Bank as

beneficiary, and two individuals as trustees executed November 19, 2014.

G. The Chapter 11 Trustee has not yet completed his review of the Claim, the

Prepetition Lien, or the value of the Prepetition Collateral, and the Court has not been asked to

find, and it does not find, that the Claim or Prepetition Lien are valid, perfected, or non-

avoidable.

H.

This Court has reviewed the Motion and has considered the representations of the

parties regarding the relief requested therein. The Interim Hearing was held before this Court on

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September [

],

2015. At the Interim Hearing, this Court heard and considered arguments by all

parties that wished to be heard.

I. The interim relief requested in the Motion and granted hereby is necessary in

order to avoid immediate and irreparable harm pending the final hearing on the Motion

contemplated by Fed. R. Bankr. P. 4001(b)(2) (the “Final Hearing”), and is in the best interest of

the Debtor’s bankruptcy estate, its creditors and other parties in interest.

NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED

THAT:

1. Granting of Motion. The Motion is granted on an interim basis as set forth herein.

Any and all objections to the Motion, insofar as it seeks interim relief, are hereby overruled. All

objections to the Motion, insofar as it seeks other than interim relief, are hereby expressly

preserved to the Final Hearing, provided that any such objection must be filed by the Objection

Deadline, set forth herein.

2. Authorization to Use Cash Collateral.

The Chapter 11 Trustee is authorized to

use Cash Collateral in the ordinary course of the Debtor’s business and solely for the purposes

set forth in the Budget annexed to the Motion as Exhibit B (the "Budget") during the period from

entry of this Order through and including the earlier of the date of the Final Hearing and the date

of occurrence of an Event of Default as defined in paragraph 12 below (the “End Date”).

3. Compliance with Budget.

Pursuant to the preceding paragraph, the Chapter 11

Trustee may use Cash Collateral solely at the times and in the amounts specified in the Budget,

provided, however, that (a) the total funds expended by the Chapter 11 Trustee may not at any

time exceed by more than 10% the cumulative aggregate level of expenses authorized in the

Budget through the end of the week, (b) the Chapter 11 Trustee may apply any unused portion in

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one week to any subsequent weekly period; and (c) the Chapter 11 Trustee may amend the

Budget with the written consent of the Bank (which the Bank may give or withhold in its sole

discretion), whereupon such amended budget shall be the “Budget” for purposes of this Order.

4. Replacement Lien. As adequate protection for any post-petition diminution in the

value of the Prepetition Collateral from the Petition Date to the End Date (as such End Date may

be extended by agreement of the parties or further order of the Court) (in the aggregate, the

Diminution Amount”), the Bank is hereby granted a post-petition replacement lien (the

"Postpetition Lien") in and to all property presently securing the Claim, together with any post-

petition proceeds thereof.

The Postpetition Lien shall attach to and be enforceable against the

same property and any post-petition proceeds thereof, to the same extent, and in the same order

of priority as the Prepetition Lien. For the avoidance of doubt, (a) the Postpetition Lien shall not

attach to causes of action or rights of recovery under chapter 5 of the Bankruptcy Code, or the

proceeds of such claims, and (b) the Bank may not foreclose or exercise any other remedy in

respect of the Prepetition or Postpetition Liens without further order of this Court.

5. Monthly Payment.

As further adequate protection, the Chapter 11 Trustee shall

pay the Bank $10,000 (the “Monthly Payment”) on or before the 25 th day of each month.

The

Bank shall apply each Monthly Payment in accordance with the loan documents on which the

Claim is based, provided, however, that if the Bank’s claim is ultimately allowed as a secured

claim (hereinafter, the “Allowed Secured Claim”) in an amount less than the full amount of the

Claim, as determined by final order of this Court, the Monthly Payments shall be reallocated so

as to be applied solely to the Allowed Secured Claim, and the Bank shall refund to the Chapter

11 Trustee the amount (if any) by which the total Monthly Payments exceed the Allowed

Secured Claim.

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6. Super-Priority Claim. If, notwithstanding the adequate protection granted by this

Order, such protection proves inadequate as a result of the stay of action against the Prepetition

Collateral under section 362, the use, sale, or lease of the Prepetition Collateral under section

363, or the granting of a lien under section 364(d), the Bank shall have an allowed claim under

section 507(a)(2) of the Bankruptcy Code with the priority specified in section 507(d) of the

Bankruptcy Code

Notwithstanding the foregoing, the Chapter 11 Trustee shall not grant or

suffer to exist any lien on the Prepetition Collateral that is senior to, or pari parsu with, the

Prepetition and PostPetition Liens other than liens existing on the Petition Date and replacement

liens therefor granted as adequate protection with the approval of this Court upon notice to the

Bank.

Solely for the purposes of this paragraph 6, in determining whether, and to what extent,

the Bank may have an allowed super-priority claim, the Bank shall be deemed to have obtained

relief from the automatic stay as of September 30, 2015.

7. Reservation of Rights (Future Use of Cash Collateral).

This Order shall be

without prejudice to the right of the Chapter 11 Trustee to seek, and the right of the Bank or any

other party in interest to oppose, the Chapter 11 Trustee's use of Cash Collateral beyond the End

Date.

8. Reservation of Rights (Challenge to Bank’s Claim and Liens).

Subject to the

following paragraph, this Order shall be without prejudice to the right of the Chapter 11 Trustee

or any other party in interest to object to the Claim or to seek avoidance of the Prepetition Lien

pursuant to Chapter 5 of the Bankruptcy Code or on any other basis whatsoever (the “Objection

Rights”).

The Postpetition Liens may be revoked or reduced to the extent that any such

avoidance, challenge or objection is successful.

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9. Deadline to Challenge Bank’s Claim or Liens

Any exercise of Objection Rights

by the Chapter 11 Trustee or any party in interest shall be filed with this Court not later than 4:00

p.m. on the earlier of October 31, 2015, or the fifth business day prior to the deadline for

submission of counteroffers to any proposed sale of Collateral by the Chapter 11 Trustee, and if

not timely filed, TIME BEING OF THE ESSENCE FOR THIS PURPOSE, any such exercise of

Objection Rights shall be forever barred notwithstanding any subsequent events in this case,

including but not limited to conversion, dismissal, approval or disapproval of such sale,

occurrence or non-occurrence of the closing thereof, or confirmation of a plan. Notwithstanding

the foregoing, the Chapter 11 Trustee’s rights concerning the proper classification or treatment of

the Claim, the value of the PrePetition Collateral, and (if the Claim is fully secured) the correct

amount of postpetition interest, fees, costs or charges to be included in the Allowed Secured

Claim pursuant to section 506(b) of the Bankruptcy Code, shall be preserved without the need

for timely exercise of Objection Rights.

10. Financial Reports and Information.

following reports and information to the Bank:

The Chapter 11 Trustee shall supply the

(a)

At the end of every two-week period, the Chapter 11 Trustee shall cause to be served on the Bank a report, in a format reasonably acceptable to the Bank, comparing the Debtor’s actual cash receipts and disbursements through the end of the previous week to the receipts and disbursements forecast by the Budget. As soon as feasible, the Chapter 11 Trustee shall supply the Bank with a report on which receipts and disbursements since the Petition Date are attributable to the Cash Collateral, and thereafter the bi-weekly reports supplied by the Chapter 11 Trustee shall break out receipts constituting Cash Collateral and disbursements of the Chapter 11 Trustee attributable to the Cash Collateral.

1.

(b)

At the same time the Chapter 11 Trustee files a financial report with the United States Trustee, the Chapter 11 Trustee shall supply a copy of such report or information to the Bank.

2.

(c)

The Chapter 11 Trustee will supply not later than September

,

2015, the

information on the last 12 months of oil runs previously requested by the Bank.

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3.

(d)

If the Bank requests financial or other information from the Chapter 11 Trustee, the Chapter 11 Trustee shall supply such information, to the extent the request therefor is reasonable, within a reasonable time.

11.

Default.

The Chapter 11 Trustee’s authority to use Cash Collateral shall

terminate upon the occurrence of any of the following events, unless waived by the Bank in

writing (each, an “Event of Default”):

(a)

the Chapter 11 Trustee’s failure to perform any of his obligations under this Order, provided, however, that on no more than one occasion during the term of this Order, the Chapter 11Trustee shall have a three-day grace period for delivery to the Bank of any report required by the preceding paragraph of this Order;

(b)

modification (without the express written consent of the Bank in its sole discretion), reversal or vacatur of this Order (but not entry of a final order granting the Motion, to the extent that such order leaves the Bank with the benefit of this Order in respect of the period from the Petition Date to the End Date); or

(c)

dismissal of the case, conversion of the case to a chapter 7 case, or removal of the Chapter 11 Trustee.

12.

Pre-petition Bank Accounts.

The Chapter 11 Trustee is authorized, but not

directed, to maintain and use the Debtor’s existing bank account at the Bank in the name and

with the account numbers, Business Analysis Checking #xxxxxxx6683, as existed immediately

prior to the Petition Date. The Chapter 11 Trustee will add reference to his appointment and the

bankruptcy case number to any new checks that he may obtain or create pre-petition pursuant to

such account.

13. Final Hearing.

The Final Hearing is hereby scheduled for October

,

2015 at

m. before this Court. Any objection to the Motion, or to entry of an order substantially

in the form hereof as final relief for the Chapter 11 Trustee pursuant to the Motion, shall be filed

with this Court and served upon the Chapter 11 Trustee, the United States Trustee and the Bank,

not later than 4:00 p.m. on September

, 2015 (the “Objection Deadline”).

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Trustee shall serve notice of the Final Hearing and the Objection Deadline, together with a copy

of this Order, on all persons entitled to receive notice under Fed. R. Bankr. P. 4001(b)(3) and

MLBR 4001-2(e).

Dated: September

, 2015

BY THE COURT

Honorable Joan N. Feeney United States Bankruptcy Judge

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Exhibit B

Budget

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Buckingham Oil Interests, Inc
Chapter 11, Case No. 15-13441
Cash Collateral Budget
1
2
3
4
5
6
7
8
9
10
11
12
13
TOTAL
prepetition
9/1-9/4/2015
9/11/2015
9/18/2015
9/25/2015
10/2/2015
10/9/2015
10/16/2015
10/23/2015
10/30/2015
11/6/2015
11/13/2015
11/20/2015
11/27/2015
Cash Sources
Cash Receipts
49,193.60
151,610.71
75,530.34
0.00
80,202.03
89,635.58
77,267.13
3,100.66
24,198.87
0.00
74,927.94
88,931.05
4,073.74
$ 718,672
TOTAL CASH SOURCES
$
49,194
$
151,611
$ 75,530
$
-
$ 80,202
$
89,636
$
77,267
$
3,101
$
24,199
$
-
$
74,928
$ 88,931
$
4,074
$ 718,672
Cash Uses
Insurance - WC
1,895
1,895
1,895
$ 5,685
Insurance - Medica
7,093
5,081
5,081
$ 17,255
Payroll - Net
19,534
16,285
$ 35,819
Payroll Taxes
11,081
9,397
$ 20,478
Rent
2,000
2,000
2,000
$ 6,000
Office Supplies - Othe
188
312
188
312
188
$ 1,188
Postage
194
194
194
$ 582
State Income Tax Withheld
78
78
78
$ 234
First Financia
10,000
10,000
10,000
$ 30,000
Bond Premium
2,039
$ 2,039
Land Man
23,333
28,333
28,334
$ 80,000
Contingency
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
$ 13,000
Paint Rock expenses
45,000
45,000
45,000
$ 135,000
Professional fees:
I-Banker
$ -
Debtor Counse
$ -
Verdolino & Lowey
$ -
CH11 Trustee
$ -
US Trustee fees
1,000
$ 1,000
Claims Agent
17,666
19,778
18,541
$ 55,985
Total Disbursements
$
3,039
$
3,000
$ 43,894
$
63,358
$ 87,001
$
1,312
$
2,895
$
56,460
$
7,081
$
75,556
$
1,312
$ 12,973
$
46,382
$ 404,264
Net Cash Flow
$
46,155
$
148,611
$ 31,636
$
(63,358)
$ (6,799)
$
88,323
$
74,372
$
(53,359)
$
17,118
$
(75,556)
$
73,616
$ 75,958
$
(42,308)
$ 314,408
Beginning Cash Position
$
189,212
$
235,367
$ 383,978
$
415,614
$ 352,256
$
345,456
$
433,780
$
508,152
$
454,793
$
471,911
$
396,354
$ 469,970
$
545,928
Ending Cash Position
$
189,212
$
235,367
$
383,978
$ 415,614
$
352,256
$ 345,456
$
433,780
$
508,152
$
454,793
$
471,911
$
396,354
$
469,970
$ 545,928
$
503,620