Crowley, Texas-based Diamondback Industries, a manufacturer of tools used in the oil patch, filed for Chapter 11 reorganization on Tuesday in Fort Worth.
In court documents, filed in the U.S. Bankruptcy Court for the Northern District of Texas, the company cited financial distress due to the COVID-19 and oil and gas-driven economic downturn. It also referred to a multimillion-dollar judgment entered against the company earlier this month after it losing a contentious, high-stakes bench trial in Waco federal court.
Diamondback’s lead bankruptcy attorney, Ian Peck, did not immediately respond to a request for comment.
The trial resulted in a $40 million final judgment in favor of Houston-based Repeat Precision, a vendor that U.S. District Judge Alan Albright found Diamondback and its CEO had defamed in an attempt to harm its business.
The case marked the first patent-related trial for the recently-benched Judge Albright, who has made the U.S. District Court for the Western District of Texas the state’s new intellectual property hotbed due to his own expertise in the area and efficient courtroom practices.
Diamondback filed for bankruptcy as Repeat Precision’s attempts to conduct post-judgment discovery began heating up, officially halting those proceedings. The same day Diamondback filed for Chapter 11, it appealed the $40 million judgment to the U.S. Court of Appeals for the Fifth Circuit.
In the bankruptcy court, Repeat Precision is listed as Diamondback’s largest unsecured creditor. Claims by 29 other creditors, which range from $1,100 to $57,500, pale in comparison to Diamondback’s $40 million claim.
Diamondback lists its assets in the range of $10 million to $50 million. It lists its liabilities in the same range.
Kelly Hart & Hallman partner Benton Cantey, who also serves as Diamondback’s president, is listed as the company’s authorized officer. Cade Kennedy of consulting firm CR3 Partners is serving as the company’s chief restructuring officer.
Court documents reveal that Diamondback secured a $40 million line of credit from UMB Bank on Dec. 30, 2019 and that it’s liable for $20 million. Diamondback says it needs to use the cash collateral to fund working capital and operating expenses, including payroll.
An emergency hearing on the cash collateral request, as well as other matters, is set for Monday.