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Samson Gets OK To Tap Cash Collateral In $4.2B Bankruptcy

Oil and gas driller Samson Resources Corp. won a Delaware bankruptcy judge's blessing Friday to tap cash collateral to continue operations as it embarks on Chapter 11 restructuring to shed nearly three quarters of its $4.2 billion debt.

U.S. Bankruptcy Judge Christopher S. Sontchi said he would enter an order allowing the Tulsa, Oklahoma, company access to up to $485 million in cash with the consent of a majority of its second-lien lenders.

Judge Sontchi initially refused to consider the cash collateral motion as counsel for the first-lien lenders argued objections over details of an adequate protection package offered as part of the deal. He sharply rebuked the attorneys for what he later said was his misperception of a threat to kill the company by pulling hedges if he did not concede their point.

After the court addressed a slate of other routine first-day motions, the attorneys clarified their positions and Judge Sontchi agreed to enter an order granting the cash collateral motion.

“I'm sorry that we had a failure to communicate,” he said. “If we lose the hedges, we have difficulty.”

After contemplating the move for most of 2015, Samson filed for Chapter 11 protection Wednesday with a prearranged plan backed by more than 68 percent of junior lenders to exchange their debt for substantially all of the company's equity.

The plan will allow Samson to shed more than $3 billion in debt and emerge with $250 million in cash on hand that will allow it to resume oil and gas exploration and the development of new wells, according to a declaration by Chief Financial Officer Phillip Cook in support of the first-day motions.

Much of Samson's debt came from a $7.2 billion leveraged buyout from the founding Schusterman family in 2011 led by Kohlberg Kravis Roberts & Co. LP affiliates and investors Crestview Partners, ITOCHU Corp. and Natural Gas Partners.

Among its debts, Samson listed a $942 million first-lien revolving credit facility, $1 billion in second-lien term notes and $2.25 billion in senior unsecured notes.

Debtors' counsel Joshua Sussberg of Kirkland & Ellis LLP said Samson's bankruptcy, like those of numerous energy and energy services companies that have sought protection this year, is the result of historic declines in the prices of oil and gas.

“This company has been dealing with a debt burden and a commodity decline that has not been sustainable,” he said.

Samson suspended exploration and drilling operations in February, and although its more than 7,000 operational wells remain in production, Sussberg said it cannot sustain itself on that revenue alone as the assets are steadily being depleted.

“Each and every day that we don't drill and we don't explore and look for new wells, the company eats away at its equity,” Sussberg said.

Samson is represented by Ryan J. Dattilo, Robert A. Gretch, Domenic E. Pacitti, Yosef Riemer, Edward O. Sassower, James H.M. Sprayregen and Joshua Sussberg of Kirkland & Ellis LLP, and Morton R. Branzburg of Klehr Harrison Harvey Branzburg LLP.

The case is In re Samson Resources Corp., case number 15-11934, in U.S. Bankruptcy Court for the District of Delaware.