CORPORATE RECOVERY

Particle Drilling Technologies, Inc., based in Houston, Texas, is an oilfield service company in the process of commercializing its patented advanced drilling technology known as Particle Impact Drilling (PID). The purpose of the PID System is to significantly reduce the time and cost of drilling hard rock or other difficult to drill formations. The company was publicly‐held from 2004 through May of 2009, and has operated since 1993. Deteriorating capital markets, costly financing and weak financial management were driving Particle’s cash burn and the Lehman bankruptcy and credit crunch accelerated the decline. When a private equity group called Accumyn’s David Eliff, the situation was grim:

The company was out of cash and its bank account was overdrawn.
Accounts receivable were fully factored, and inventory values were insignificant.
There was no visible liquidity or additional borrowing capacity.
Payables averaged 106 days. Suppliers were threatening COD and/or legal action.
Liquidation would realize 26 percent for the secured debt.

With a viable core business and technology, a loyal and strong customer base, and an ample market size and potential for huge gross margins, Mr. Eliff and his team concluded that Particle could succeed. Efficiency, machining know‐how, delivery and customer service were excellent and Management and key employees were willing and capable to make the necessary changes to allow the organization to be mobilized and led; however, adequate bridge financing was a problem. The solution became apparent after meeting with a major private equity firm who agreed with Mr. Eliff’s market assessment of the PID. Outstanding results were achieved:

A majority of all jobs were preserved.
Shell Oil and Encana remained champions of the Technology; the customer base remained intact.
Bank credibility and trust was restored; the secured debt realized a 100 percent recovery.
Expenses were cut by 43% from the previous 6 months.
A plan of reorganization and a disclosure statement has been approved and PDTI Holdings, LLC will purchase the assets and exit bankruptcy in less than 90 days.
Legal and other professional fees are less than $200,000.

Mr. Eliff will continue with PDTI Holdings the new owner of the company, as the interim Chief Financial Officer with his focus on operational and financial improvements to facilitate the commercialization of the PID units in North America.

Accumyn represented one of the parties subject to federal government fines as a result of the Macondo oil spill.     One of the key issues in this proceeding was the probability that the client would either suffer a credit rating decrease or be forced into bankruptcy as a consequence of the proposed fines.   In support of the Accumyn’s testifying expert, Dan examined the client’s capital structure and determined that both downgrade and default were risks owing to the company’s peculiar debt structure.

In comparison to other companies in its industry, the Company’s balance sheet over levered. In addition the debt securities the company had recently issued contained provisions for an upward revision of the coupon rate for each level of debt down grade from the level when the bonds were issued.

As a result, a downgrade would have an immediate effect on cash flow to cover the cost of these bonds already outstanding.   This held the potential for a downward debt spiral into bankruptcy as the cost of capital rose at a time when the company’s business was suffering as a result of the shutdown in drilling in the Gulf of Mexico imposed following the disaster.

The case was subsequently resolved favorably for the client.

In a lawsuit involving termination of a Managing General Agency agreement by an insurance carrier, Accumyn provided a review of the operating documents and transactions involved in a multi-state insurance program, and the impact of an insurance carriers untimely termination of the program had on commission income earnings by the MGA, insurance agency relationships that the MGA brought to the relationship, and profit contingency to be received by the MGA. In this ongoing case, Accumyn has made extensive calculations and projections of insurance account submission activity during a period following the termination of the agreement, which was done in violation of the written agreement and insurance codes of the states involved. Expert witness reports and rebuttal reports, along with testimony have been provided in this proceeding to date. The damages sustained by the MGA were for loss of commission income and profit sharing resulting from untimely termination of the agreement, and interference in business relationships the MGA had developed over many years.