The city of Homer and Homer Electric Association have negotiated reductions in demands for payment by a law firm representing the Buccaneer Creditors’ Liquidating Trust. The demands came out of proceedings filed by Buccaneer Oil after it declared bankruptcy in May 2014.
City attorney Thomas Klinkner negotiated about a 50-percent reduction in the demand for payment, City Manager Katie Koester announced on Oct. 26 at the Homer City Council meeting.
Homer Electric Association also negotiated a reduction in a similar demand for payment, said HEA spokesperson Joe Gallagher. Gallagher said the payment was “significantly less than the original preference payment demand.”
As part of the Buccaneer Oil bankruptcy proceedings, Snow Spence Green of Houston, acting as trustee for the creditors’ trust, sent out letters to numerous lower Kenai Peninsula businesses and civic entities, including HomeRun Oil, Moore & Moore Services, the Best Western Bidarka Inn, Alyeska Tire and Maritime Helicopters.
For the city of Homer, the trustee asked the city to pay back $17,457.15. Klinkner negotiated a cut to $8,730. The demand for payment was for money received for port and harbor fees while Buccaneer’s jack-up rig, Spirit of Independence-Endeavour, and other vessels were moored in Homer in 2013.
Koester told the council she reluctantly agreed to that payment.
“While it gives me heartburn to acquiesce to that claim, it is a modest amount that could quickly be surpassed in legal fees if we were to engage in a lengthy battle,” Koester wrote in her city manager’s report for the Oct. 26 meeting.
Under bankruptcy law, a creditor’s trust can ask back some payments made in the 90 days before a company declares bankruptcy. The demand was for money paid for what are called “preferential payments.” Creditors who receive money in the ordinary course of business do not have to pay back money to the creditor’s trust. The city argued that port fees were ordinary-course-of-business payments.
David Bundy, an Anchorage bankruptcy lawyer representing several businesses that received demands for payments, said that generally in bankruptcy cases, trustees have a lot of latitude in making claims.
“The fact is situations vary greatly from one case to another and the outcome is often unclear,” he said. “The legal costs of bringing or defending a case are often a factor in settling these cases, just as with most other types of litigation.”
Bundy said he could not name his clients or discuss the status of their cases.
Citing customer confidentiality, Gallagher said he could not say exactly how much Buccaneer paid in its utility bills or how much the negotiated settlement was with the creditor’s trust. That amount isn’t reportable to members, Gallagher said.
In response to a question at the Oct. 26 meeting by council member David Lewis about other businesses affected, Koester told the council she did not know if the other businesses had reached settlements.
Shelly Erickson of HomeRun Oil said she could not discuss negotiations with the creditor’s trust. Lloyd Moore of Moore & Moore Services said his attorney is still working on the issue. Both businesses had provided services to Buccaneer while it did work on the lower peninsula, including for fuel oil deliveries, trash pickup, water hauling and portable toilets.
“We’re just all in a waiting pattern right now,” Erickson said. “People need to know that all of us are being affected as a whole by what’s going on here.”
When the demands for payment were made in July, in response to questions from the Homer News, Karsten Rodvik, a spokeperson for the Alaska Industrial Development and Export Authority, said AIDEA was not a director investor in Buccaneer. AIDEA invested in and was a preferred member of Kenai Offshore Ventures, which owned the jack-up rig Endeavour-Spirit of Independence. Kenai Offshore Ventures leased the rig to Buccaneer.
AIDEA sold its ownership in the jack-up rig in November 2014 to Ezion Holdings, another partner, and received payment in full in February. Buccaneer made no demands for payment to AIDEA.
Rodvik said he was not aware of any state entity that owed money to Buccaneer or was entitled to receive money. Rodvik also said he did not know of any bonds Buccaneer had with the state.
Michael Armstrong can be reached at email@example.com.