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In re Allied Nevada Gold Corp.

United States District Court, D. Delaware

February 10, 2017

In re ALLIED NEVADA GOLD CORP., et al., Reorganized Debtors.[1]
v.
ALLIED NEVADA GOLD CORP., et al., Appellees. BRIAN TUTTLE, Appellant, No. 15-10503-MFW

          Brian Turtle, Sarasota, Florida. Pro Se Appellant.

          Michael D. DeBaecke, Esquire, and Stanley Byron Tarr, Esquire, Blank Rome LLP, Wilmington, Delaware. Counsel for Appellees Reorganized Debtors.

          Natalie M. Cox, Esquire, United States Department of Justice, Office of the United States Trustee, Wilmington, Delaware, and Robert J. Schneider, Jr., Esquire, United States Department of Justice, Office of the United States Trustee, Newark, New Jersey, Counsel for the United States Trustee.

          MEMORANDUM OPINION

          ROBINSON, Senior District Judge

          I. INTRODUCTION

         Brian Tuttle ("Tuttle"), [2] who appears pro se, filed this bankruptcy appeal on February 1, 2016.[3] (D.I. 1) The appeal arises from two orders entered in the United States Bankruptcy Court for the District of Delaware ("the bankruptcy court") in In re Allied Nevada Gold Corp., Bankr. No. 15-10503-MFW (Del. Bankr.) ("Bankr. No. 15-10503-MFW"): (1) the January 20, 2016 omnibus order awarding final allowance of compensation for services rendered and for reimbursement of expenses (see Bankr. No. 15-10503-MFW at D.I. 1367);[4]and (2) the January 22, 2016 omnibus order denying shareholder motions (see id. at D.I. 1373). Tuttle seeks reversal of the January 22, 2016 omnibus order denying shareholder motions. In addition, Tuttle references his other appeals and states that the relief he requests in the instant appeal "is nearly identical" to that sought in the appeals found at Civ. No. 15-946-SLR and Civ. No. 15-949-SLR, where Tuttle sought reversal of the October 8, 2015 confirmation that confirmed debtors' amended joint Chapter 11 plan of reorganization.[5] (See Bankr. No. 15-10503-MFW at D.I. 1136) The court has jurisdiction to hear an appeal from the bankruptcy court pursuant to 28 U.S.C. § 158(a).

         II. BACKGROUND

         A. Chapter 11 and Restructuring Agreement

         Reorganized debtors are a U.S.-based gold and silver producer that operates in the State of Nevada. (See D.I. 24) On March 10, 2015 ("petition date"), debtors filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the bankruptcy court. As of the petition date, debtors had approximately: (1) $340 million of secured indebtedness in the form of borrowings and issued letters of credit under (a) a secured credit agreement, (b) a term and security deposit loan agreement, (c) capital lease and term loan agreements, (d) swap agreements, and (e) a promissory note; and (2) $350 million of unsecured debt in the form of (a) senior unsecured notes issued pursuant to an indenture, and (b) trade debt. (See Bankr. No. 15-10503-MFW at D.I. 16, ¶¶ 12-24)

         Prior to the petition date, debtors negotiated the terms of a consensual restructuring transaction with the holders of 100% of debtors' funded secured debt and approximately 67% of debtors' unsecured notes. (Id. at D.I. 16, ex. 2) On the petition date, debtors entered into a restructuring support agreement ("RSA"). (See id.)

         On March 19, 2015, the United States Trustee for Region 3 ("U.S. Trustee") appointed a creditors committee in the Chapter 11 case pursuant to Bankruptcy Code § 1102, and on April 10, 2015, appointed a committee of equity security holders, also pursuant to § 1102 of the Bankruptcy Code. (Id. at D.I. 95, D.I. 157) The equity committee's membership was reconstituted from time to time subsequent to its formation. (Id. at D.I. 371, D.I. 449) The equity committee and creditors committee were dissolved on the October 22, 2015 effective date ("effective date") in accordance with the terms of the amended plan and confirmation order. (See Bankr. No. 15-10503-MFW, D.I. 931, at 35, Art. IV, § 4.14)

         B. Sale Order

         On March 31, 2015, debtors filed a motion seeking bankruptcy court approval of a proposed sale of certain non-core exploration properties and related assets ("sale assets"), along with related bidding procedures and entry into a stalking horse purchase agreement with Waterton Global Resource Management ("Waterton") that secured a $17.5 million cash bid for the sale assets. (Id. at D.I. 133) Debtors' financial advisor, Barak M. Klein ("Klein"), stated that the sale was "in the best interests of debtors and their estates because the debtors were not able to commit the time and capital to effectively monetize the sale assets through their own operations, and the proceeds from the sale would allow debtors to satisfy, in whole or in part, an obligation under the original RSA. (Id. at D.I. 133, ex. D at ¶ 12) The bankruptcy court approved the sale motion and entry into the stalking horse purchase agreement and the proposed bidding procedures. (Id. at D.I. 606)

         C. Debtors' Plan and Amendments to the Plan

          On April 24, 2015, debtors filed a joint Chapter 11 plan of reorganization and disclosure statement. (Id. at D.I. 251, 252) The plan of reorganization proposed a recovery to holders of canceled common stock, contingent on the class of such holders voting in favor of such plan, in the form of warrants that could convert into 10.0% of the new equity in the reorganized debtors. (Id. at D.I. 251 at § 2.16) The equity committee indicated it intended to object to the plan of reorganization's proposed treatment of holders of canceled common stock, and sought discovery related thereto. (Id. at D.I. 506 at ¶ 10) Debtors provided discovery to the equity committee. (See D.I. 793, ex. C at ¶¶ 8-12)

         Following the filing of the plan of reorganization, debtors' business was negatively affected by numerous factors that severely impeded its mining operations including: (1) high employee turnover; (2) refusal by key vendors to contract with debtors on commercially reasonable terms; (3) gold and silver production levels failing to meet expectations; and (4) continuing decline in gold prices. (See Id. at ¶¶ 6-7) On July 8, 2015, debtors commenced a plan to suspend mining operations at their sole revenue-generating mine, the Hycroft Mine, and terminated approximately 230 of the remaining 368 employees. (See Id. at D.I. 919 at 17-19; D.I. 1100 At ¶¶ 10-12) According to appellees, due to the plan to suspend mining operations, debtors were unable to comply with several covenants and milestones in the RSA and, as a result, the RSA parties had the right to terminate the RSA. (See Civ. No. 15-946-SLR, D.I. 16; Civ. No. 15-949-SLR, D.I. 22 at 9) Thereafter, debtors negotiated certain amendments to the original RSA ("amended RSA") with the RSA parties and, on August 27, 2015, the bankruptcy court approved debtors' assumption of the amended RSA. (Id. at D.I. 926)

         On July 23, 2015, debtors filed an amended joint Chapter 11 plan of reorganization and disclosure statement, both of which reflected the agreements reached in the amended RSA. (Id. at D.I. 756, 758) The amended plan of reorganization proposed no recovery to holders of canceled common stock. (Id. at D.I. 756 at §2.14)

         D. Global Settlement

         On August 19, 2015, debtors and RSA parties announced they had reached a settlement ("global settlement"), with the remaining major constituencies in the Chapter 11 cases not parties to the amended RSA - the creditors committee and the equity committee. (Id. at D.I. 864) On August 27, 2015, debtors filed a second amended joint Chapter 11 plan of reorganization ("amended plan") and a second amended disclosure statement ("amended disclosure statement") that reflected the global settlement. (Id. at D.I. 931, D.I. 933) The amended plan proposed to provide debtors': (1) secured creditors a distribution in the form of new secured debt in the reorganized debtors ("new first lien term loans"); (2) unsecured creditors the option to receive a cash recovery or to receive privately traded common stock in the reorganized debtors ("new common stock"); and (3) canceled common stock holders a distribution in the form of new warrants. (Id. at D.I. 931 at Art. II) The creditors committee and equity committee supported confirmation of the amended plan. (Id.)

         On August 28, 2015, the bankruptcy court entered the disclosure statement order. (Id. at D.I. 940) On September 8, 2015, on behalf of the ad hoc equity committee holders of canceled common stock, Tuttle filed an objection to debtors' notice of hearing with respect to the amended disclosure statement. (Id. at D.I. 969)

         E. Examiner Motions

         On August 11, 2015, Tuttle filed a motion to appoint an examiner. (Id. at D.I. 819) Debtors, the creditors committee, and an ad hoc group of noteholders objected to the motion. (Id. at D.I. 957, 958, 960) The equity committee also submitted a response to the motion and stated that it had "analyzed a multitude of potential claims against debtors, debtors' directors and officers, and third parties .... weighed its valuation analysis, operational analysis, and analysis of certain potential claims" and, based on its analysis, it "believes that the proposed [amended] plan provides existing equity holders with the best opportunity for a recovery given debtors' current circumstances." (Id. at D.I. 961, ¶2, 4) Following a September 15, 2015 evidentiary hearing, the bankruptcy court entered an order that denied the motion to appoint an examiner.[6] (Id. at D.I. 995, 1021)

         F. ...


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