Connacher Oil & Gas Ltd. has defaulted on some of its debt and bondholders are right to demand repayment, a former U.S. bankruptcy judge said in a Canadian court filing on behalf of a creditor group represented by Credit Suisse Group AG.

Connacher, hurt by falling energy prices, is seeking an Alberta court’s approval to swap C$1 billion ($788 million) of bonds for equity and to issue $35 million of convertible notes. Holders of Connacher shares and bonds voted in favor of the plan on Monday in Calgary, according to a company statement.

Credit Suisse is alleging the company defaulted on a $128 million loan and demanding immediate repayment. The bank represents more highly ranked creditors who are fighting the plan and who sued in a New York court. It has argued that the Canadian court should defer a decision until the New York case has been decided.

Credit Suisse “was within its rights under New York law when it accelerated the debt” and sought repayment from Calgary-based Connacher, Allan L. Gropper, a retired Manhattan bankruptcy judge, said in court papers filed last week in Calgary.

Connacher is among smaller oil-sands developers struggling to stay afloat with crude trading at about half its June high amid a global glut. Connacher drew interest from debt investors willing to finance upstart developments in 2011, when U.S. crude above $90 a barrel made oil-sands projects attractive. The U.S. benchmark crude fell 0.4 percent to settle at $48.68 a barrel in New York.

Without a new source of capital, Connacher would have a tough time staying in business if it was forced to repay the $128 million loan, Moody’s Investors Service Inc. said.

Connacher’s U.S. dollar bonds were trading at 4 cents on the dollar while its first-lien term loan was trading just below 89 cents, according to the latest data compiled by Bloomberg.

The lawsuit filed this month by the Swiss bank’s Cayman Islands branch on behalf of lenders alleged Connacher defaulted on its loan by missing an interest payment on its bonds. Connacher has disputed that, saying it was allowed under its agreement with the lenders to miss the payment as it sought to restructure. None of the claims have been proven in court.

Connacher Chief Executive Officer Chris Bloomer didn’t return phone and e-mail messages seeking additional comment. The shares closed unchanged at 3 Canadian cents in Toronto and have declined 25 percent this year.

The lenders said in a filing last week with the Alberta court that Connacher’s cash flow is “worse than severe,” and it could face insolvency even after restructuring. According to Connacher’s estimates, new capital from the restructuring would barely cover costs for six months and it would run out of working capital within a year, Credit Suisse said.

The Court of Queen’s Bench of Alberta has scheduled a final hearing Tuesday to consider Connacher’s plan.

Connacher has about $1 billion of debt, including a C$30 million senior secured credit facility maturing in 2016, $550 million of 8.5 percent notes due 2019, C$350 million of 8.75 percent notes due 2018 and the $128 million first-lien loan for which Credit Suisse is an agent.

The restructuring would make Avenue Capital, one of the leading bondholders, Connacher’s largest shareholder, with a stake of more than 41 percent, according to a report by Spencer Cutter, a Bloomberg Intelligence credit analyst.

A spokesman for Avenue at Kekst & Co. in New York declined to comment.

The New York case is Credit Suisse AG v. Connacher Oil & Gas Ltd., 650806/2015, New York State Supreme Court, New York County (Manhattan).