The U.S. Bankruptcy Court for the Southern District of New York last Tuesday approved a partial settlement between independent oil and natural gas producer Rosetta Resources Inc. and Chapter 11-bound Calpine Corp. On the same day, Rosetta asked the court to dismiss Calpine's unsettled allegations of fraudulent actions by the producer.
The court formally approved an Aug. 3 partial transfer and release agreement, which binds Calpine to "firmly place legal title in Rosetta's name" back to the date of the original transaction in 2005, covering a number of oil and gas properties that the independent power plant developer and operator had conveyed or agreed to convey, but which still had ongoing title issues.
Rosetta said the court's latest action does not impact the other pending issues between the two companies.
Court approval covered the Calpine-Rosetta agreement on four outstanding claims:
"This partial settlement as now approved represents a positive step forward for our company as it resolves certain title issues on properties, included in the original transaction," said Rosetta CEO Charles Chambers. "However, this partial settlement does not resolve any of the issues raised by Calpine in its fraudulent conveyance claim, which remains pending."
Also last Tuesday, Rosetta asked the bankruptcy court to dismiss unsettled allegations of fraudulent actions by the oil/gas producer made by Calpine, which at one time owned Rosetta's principal North American oil/gas reserves. Rosetta argued that the Calpine claims are barred as a matter of law by the expected full payment of Calpine's creditors under the company's proposed reorganization plan.
The two companies in early August reached a partial settlement on many of the issues that have divided them since Calpine sold its gas assets to Rosetta (see NGI, Aug. 13). Calpine originally alleged that it was cheated out of about $400 million, according to a disclosure statement filed June 20 as part of its bankruptcy proceeding, and at that time said it was filing a lawsuit against Rosetta.
"We are confident that this case is completely without merit as Rosetta paid fair value for Calpine's oil and gas business," Chambers said. "Since the creditors have not been harmed and will be paid 100% of their claims with interest, there is simply no basis for any fraudulent transfer claim, which is solely a creditor remedy, to be pursued.
"From the outset of Calpine's bankruptcy proceedings, Rosetta has maintained that the transaction in which it received all of Calpine's oil and gas business was fully vetted and approved by Calpine's board of directors and supported by the opinions of Calpine's numerous third-party legal and financial advisers."
In its motion to the court, Rosetta said $1.05 billion in gross cash proceeds paid in the oil and gas sale constituted "fair value for the business," considering it also included Rosetta assuming debt and liabilities, a gas purchase contract for the supplies in Northern California for Calpine and a contract to market all of Rosetta's production.
Rosetta argued that even though it would expect to "prevail" on the merits of its case, Calpine's claim should be tossed out because it is legally barred by law.
Because of what Rosetta called "overwhelming evidence that Calpine will be paying its creditors in full and even distributing monies to its old equity holders," the oil/gas firm asked the court to set aside further actions on the litigation "until the full amount of Calpine's creditors will receive under the reorganization plan is finally established to avoid both Calpine and Rosetta incurring unnecessary legal fees."
For its legal argument, Rosetta contends that it is "highly likely" that Calpine creditors will receive full repayment.
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