A Delaware bankruptcy judge rejected fracking-sand supplier Emerge Energy Services LP’s attempt to bind equity holders and junior creditors to legal releases in its chapter 11 exit-plan if they didn’t return opt-out forms, <em>WSJ Pro Bankruptcy</em> reported. Bankruptcy Judge <b>Karen Owens</em> ruled on Thursday that Emerge Energy can’t assume shareholders and unsecured creditors that didn’t return opt-out forms consented to releases covering groups that include the company and its lenders. The opt-out forms explained what would happen if creditors didn’t return them but Emerge Energy couldn’t prove that failing to return the forms “manifested their intent to provide a release,” Judge Owens said. “Carelessness, inattentiveness, or mistake are three reasonable alternative explanations,” the judge said in a written ruling. Despite the setback, Thursday’s ruling was mostly favorable to Emerge Energy’s bankruptcy plan. Judge Owens called on the company to revise the plan’s so-called third-party releases before she considers confirming the plan, which proposes swapping bond debt for equity in the reorganized business.
