Rosetta Resources Inc. asked the U.S. Bankruptcy Court, Southern District of New York, Tuesday to dismiss unsettled allegations of fraudulent actions by the oil/gas producer made by Chapter 11-bound power plant operator Calpine Corp., 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 Daily GPI, Aug. 9). 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,” said Rosetta CEO Charles Chambers. “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/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.
In its partial settlement, Rosetta said that with court approval, both it and Calpine will, “without prejudice,” reach agreement on four outstanding claims:
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