History
BPI Energy built a coalbed methane position in Illinois, borrowed heavily from GasRock, was delisted from the exchange, and filed for Chapter 11 bankruptcy in February 2009.
2005-2006: Listing and Illinois acreage
BPI, a coalbed methane (gas held in coal seams) explorer focused on the Illinois Basin, moved its shares from the TSX Venture Exchange to the American Stock Exchange on December 13, 2005, trading under the ticker BPG. In February 2006 shareholders approved a new name, BPI Energy Holdings, Inc., and doubled authorised common shares from 100 million to 200 million, which leaves room to issue more shares later.
In April 2006 the company signed two 20-year coalbed methane leases in Illinois: about 100,000 acres with IEC (Montgomery), LLC and about 12,000 acres with Christian Coal Holdings, LLC.
It also had a dispute over the Southern Illinois Basin Project. After it sued Colt LLC and others on March 15, 2006, the parties settled. On June 23, 2006 the company paid Colt $3,000,000, gave up its interest in the old lease and bought the coalbed methane estate on about 10,000 of the 43,000 acres, including all producing wells and proved reserves. That ended the lease royalties of 15% of gross sales, with a minimum of $42,000 a month. Colt kept the right to buy wells on that land at fair market value.
2007-2008: Borrowing from GasRock
The record is quiet for the next year. Then, on July 27, 2007, the subsidiary BPI Energy signed its first debt facility, with GasRock Capital LLC. It had an initial commitment of $10.2 million, plus up to $64.8 million more at GasRock's discretion. The company drew $9.1 million. Interest was the greater of 15% or LIBOR plus 9%. The loan was secured on substantially all of the subsidiary's assets and guaranteed by the parent. GasRock also received a 1% royalty on gas from existing properties and an extra 4% on existing Southern Illinois Basin wells. The company also had to hedge, taking a 23-month collar with BP Corporation North America on 460,000 mmbtu, with a $7.00 floor and $11.00 cap per mmbtu.
In November 2007 the agreement was amended. The due date moved from July 2008 to January 30, 2009, and the initial commitment rose to $10.7 million.
2008-2009: Default, delisting and bankruptcy
By September 2008 the company was in breach of the loan terms, including a requirement to keep current assets above current liabilities. On September 23 GasRock agreed to hold off enforcement until January 30, 2009, or March 31, 2009 if conditions were met. In return it received a security interest in the Western Fuels of Illinois leases dated June 18, 2008 and a $200,000 fee added to the debt. Any proceeds from the company's litigation with affiliates of Drummond Coal had to go to the debt. About $12.4 million was outstanding, and the cash part of interest was cut to 4%, with the rest added to principal.
On October 30, 2008 the company said in a press release that it was insolvent. On November 17 NYSE Alternext US, as the American Stock Exchange had become, said it intended to delist the shares, citing substantial losses, the insolvency statement and a late annual report for the year ended July 31, 2008. The company chose not to appeal, and trading was suspended on November 28, 2008. In January 2009 the exchange filed to remove the securities from listing.
On February 3, 2009, after the forbearance period had ended, the parent and BPI Energy, Inc. filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Northern District of Ohio. As of February 5, 2009 they were running their businesses as debtors in possession. No plan had been disclosed, and the filing said nothing about what would happen to shareholders' shares.
Written from the 13 story beats below (2005 to 5 Feb 2009), which come from the company's own announcements and filings.