Cano Petroleum and Units file for Chapter 11 bankruptcy

Texas-based Cano Petroleum and its subsidiaries filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Texas.

Cano submitted a plan for reorganization and will continue operations. They have also asked for approval of a marketing process in which privately-held NBI Services Inc. would be appointed as a “stalking horse” bidder.

A “stalking horse” bidder gets chosen by a bankrupt company from a group of potential buyers to make the first bid for assets, which is used as a basis for the sales process.

Without a higher bid, NBI Services will pay $47.5 million for bankrupt Cano and proceeds would go to pay off creditors.

Cano has been crippled by continued losses and default under their loan agreements. The company has no ability to obtain credit and has negative cash flow and working capital.

Chapter 11 bankruptcy gives a business the opportunity to continue their business while it resolves its debts. A bankruptcy attorney will be able to determine if a troubled business if eligible for this particular bankruptcy structure.

Bankruptcy gives a business the chance to reduce or eliminate some of their debts and return to profitability. The exact structure a business choses depends on the recommendation of a bankruptcy lawyer.

Not all companies can continue to operate after going through debt protection, but their bankruptcy attorneys will work to liquidate assets and pay off creditors.