JAB Energy Solutions II, LLC

THE DEBTOR PROVIDES SERVICES TO THE OIL & GAS INDUSTRY

According to its website, the Debtor is a mid-size engineering firm offering comprehensive project management services for decommissioning, abandonment, construction, and installation of offshore and onshore oil and gas facilities, platforms, and pipelines. JAB Energy Solutions II, LLC (“JAB”) is a Delaware company that was established in 2008. JAB is based in Houston, Texas and has offices in Lake Charles, Louisiana, but it serves major and independent energy companies worldwide.

As with all companies working in the oil and gas space, and particularly with engineering firms that offer decommissioning services, there is the potential for large environmental liability in this bankruptcy case. Despite JAB’s philosophy to ensure that each phase of its operations is completed safely and efficiently, while protecting the environment and maintaining complete regulatory compliance, environmental liability can pile up on even the most careful companies.

JAB Energy Solutions in 100% owned by Allison Marine Holdings, LLC. It filed for bankruptcy indicating that it has 200-999 creditors, and $10-50 million in both assets and liabilities.

A LOT IS UNKNOWN

At this point, the Debtor has filed for bankruptcy protection but not much else. Typically, when larger companies like JAB file for bankruptcy, they do so with a slew of filings, including a series of what bankruptcy lawyers like to call “first day motions.” These motions usually ask the Court to order relief on an expedited basis to allow the Debtor to continue using its bank accounts, have access to its cash, and pay certain people that are critical to the Debtor’s operations.

Here, the Debtor filed its bankruptcy petition without any supporting papers. Its almost certain that these “first day motions” and other information that bankruptcy debtors are required to provide will be filed shortly. For now, though, creditors are mostly left to wonder.

One thing that stood out to the experienced bankruptcy professionals at PRLT from the lone filing in the JAB bankruptcy is that both the Managing Member of the company who authorized the bankruptcy filing – Henry “Hank” Robards, Jr. – and the proposed Chief Restructuring Officer – Albert Altro – are new to the company. Between that and the fact that the case was apparently filed before all of the first day papers were prepared, we are left to wonder what happened at the company in the weeks leading up to the bankruptcy filing.

CREDITORS MUST BE PREPARED

Chapter 11 bankruptcy petitions ask the debtor to indicate whether they believe they will be able to pay their creditors anything through the case. On JAB’s Petition, the Debtor indicated that they believe they will not have any money left to pay unsecured creditors. This is not necessarily determinative of outcome, but it is a warning sign that creditors should be paying attention to this case.

When debtors indicate that they will be administratively insolvent like JAB did, creditors must be on guard. Even when Debtors claim they cannot pay, there are sometimes avenues that creditors can pursue to get some recovery.

One of the best and easiest ways for creditors to protect their rights is by forming an official unsecured creditors’ committee. By forming a Committee, unsecured creditors can have sophisticated bankruptcy lawyers represent their rights, while those lawyers are paid for by the Debtor. Committees have rights including the ability to investigate where the Debtor’s money went and potentially pursue that money to get it returned and then paid out to creditors. These are powerful rights that can turn a losing case for creditors into one where creditors see a payout.

If you have questions about Committees or about this case in particular, please contact PRLT.