Munsch Hardt Announces Plan of Liquidation is Confirmed for Provident Royalties, LLC and Affiliates
June 17, 2010
Munsch Hardt Kopf & Harr, P.C. represented the Chapter 11 Trustee of Provident Royalties, LLC and its 26 debtor affiliates in successfully obtaining confirmation of a plan of liquidation for those entities on June 10, 2010. The plan was proposed jointly by the Chapter 11 Trustee, official committee of unsecured creditors and official investors committee. Certain provisions of the plan were opposed by a small group of investors. On June 14, 2010, the plan took effect, and distributions to creditors have commenced.
The plan provides for a 100 percent return to all creditors on their claims, with interest, and creates a liquidating trust to pursue claims against third parties for the benefit of holders of preferred stock interests. Among the claims being pursued by the trust are personal claims of investors who elected to assign their claims against certain third parties to the trust. The plan was overwhelmingly approved by creditors and investors.
Prior to filing bankruptcy, Provident Royalties and its affiliates were in the business of acquiring and investing in both producing and non-producing leasehold and mineral interests across the United States, with a primary focus in Oklahoma. From approximately September 2006 through January 2009, the Provident Royalties entities solicited investments and sold preferred stock through a series of private placement offerings. During that time period, the Provident Royalties entities raised approximately $485 million from approximately 7,700 investors nationwide. In response to significant declines in the prices of both crude and natural gas in late 2008 and early 2009, Provident Royalties, LLC and certain of its affiliates were forced to file bankruptcy on June 22, 2009. Shortly thereafter, on July 1, 2009, the Securities Exchange Commission (SEC) sought and subsequently obtained an order appointing a receiver for Provident Royalties, LLC and other entities, asserting that the private placement offerings were fraudulent and that the Provident Royalties entities were a massive Ponzi scheme.
"Although we are still working to conclude the case, getting a plan confirmed in less than a year is an accomplishment," says Shareholder Kevin M. Lippman, one of the lead attorneys for the Chapter 11 Trustee. "This is a complicated and unusual case, given the overlay of the SEC receivership and bankruptcy proceedings and the interests of the different constituencies involved," said Shareholder Dennis L. Roossien, Jr., who served as both the Chapter 11 Trustee of Provident Royalties and its debtor affiliates and as the receiver of the debtors and related non-debtor entities in the proceeding commenced by the SEC in the United States District Court for the Northern District of Texas. "The plan structure should maximize the potential return to the victims of the Ponzi scheme — the investors," added Kevin M. Lippman.
The Munsch Hardt team was led by Shareholders Kevin M. Lippman and Joseph J. Wielebinski. Shareholders James M. McGee, Jay H. Ong, Mark L. Nastri, Christopher D. Speer and Richard W. Wilhelm, and Associates Kate M. Patrick, Lee J. Pannier, Lea C. Dearing and Aryn S. Self, were also key members of the team.
The official committee of unsecured creditors was represented by Gardere Wynne Sewell LLP and the official investors committee was represented by Rochelle McCullough LLP.
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