Blocking The Blocking Provision In The Intervention Energy Case

Rated and other debt issuances are often structured with borrowers that are special purpose entities, whose governance provisions are designed to inhibit bankruptcy filings. A recent District of Delaware bankruptcy court case, while not directly on point, throws into question the premises underlying the efficacy of such provisions.

Intervention Energy Holdings, LLC and Intervention Energy, LLC, each a Delaware limited liability company, were formed for the purpose of oil and natural gas exploration and production, operating almost entirely in North Dakota. To fund drilling and well-development costs, each Intervention entity entered into a Note Purchase Agreement with EIG Energy Fund XV-A and related entities, pursuant to which EIG purchased $200 million in senior notes, in the aggregate, issued by the Intervention entities and secured by liens on substantially all their assets.