By Michael L. Moskowitz & Melissa A. Gueynov

In an opinion of interest to Chapter 11 practitioners, the United States District Court for the Western District of Louisiana recently held that the rental value of a chapter 11 debtor’s unused leased equipment qualifies for administrative expense status if there are intangible benefits to the estate.  Kimzey v. Premium Casing Equipment LLC, 2018 U.S. Dist. LEXIS 42744 (W.D. La. Mar. 14, 2018). Read the full opinion here.

Kimzey involved oil field equipment leased - but not used - by debtor before filing for bankruptcy relief under chapter 11 of the Bankruptcy Code. Subsequent to its bankruptcy filing, debtor’s assets were purchased by a third party that did not buy the leased equipment. After the sale, lessor sought administrative expense status for the post-petition lease payments due, contending they were actual and necessary costs of preserving the bankruptcy estate.