Oil and gas firm Samson Resources Corp. told a Delaware bankruptcy judge Thursday that its restructuring deal with lenders is in danger of collapsing and that its CEO would be resigning in December, sending a case that was believed to be a quick prearranged Chapter 11 into uncertainty.
At a hearing in Wilmington, Samson attorney Joshua Sussberg of Kirkland & Ellis LLP told the court that the continuing fall in natural gas prices had jeopardized the restructuring support agreement the debtor struck with more than two-thirds of junior lenders shortly before it filed for Chapter 11 protection, and the company was negotiating the possibility of reworking the deal.
The potential replacement agreement might have less value for second-lien creditors, but the debtor is firm in its belief that a reorganization rather than a sale or liquidation is the best way forward, Sussberg told U.S. Bankruptcy Judge Christopher S. Sontchi.
Sussberg also said that Samson CEO Randy Limbacher is set to resign in December and the company feared other key employees might jump ship as well.
“We're doing everything we can to stabilize that,” Sussberg said, without offering specifics.
What's more, much of the opposition of the official committee of unsecured creditors, whose constituent general unsecured creditors are slated for a recovery of up to 1 percent equity in a reorganized company on $2.3 billion in bond claims, still remains.
The committee argues that the case looks as if its being adjudicated only for secured creditors’ benefit and that its constituents' recoveries could be enhanced if Samson were to sell or liquidate, but Sussberg maintained that reorganization was still the way to go, especially in light of continuing fluctuations in oil and gas prices.
“Marketing these assets in this commodity market is not a value maximizing solution,” Sussberg told Judge Sontchi.
Samson's case was thought to be one of the several prearranged bankruptcies that come into court with a deal in-hand and consensually go through the Chapter 11 plan confirmation process, but with the revelations and difficulties unveiled Thursday it seems to have veered into an uncertain future.
The company filed for Chapter 11 protection in September with a restructuring support agreement backed by more than two-thirds of junior lenders to exchange their debt for nearly all of Samson’s equity subject to dilution.
General unsecured creditors were slated to get a 1 percent equity stake in exchange for their aggregate $2.3 billion in claims if they vote in favor of the plan, and a 0.5 percent stake if they don’t, according to court records.
The reorganization was supposed to allow Samson, which suspended its exploration and drilling in February, to shed more than $3 billion in debt and emerge with $250 million in cash on hand that would allow it to resume the bulk of its business, according to a first-day declaration from Chief Financial Officer Philip Cook.
Samson cited the historic drop in crude oil prices, which has sent several other companies in the sector to seek refuge in Chapter 11, as one of the reasons for its filing, with the continued volatility in the market appearing to contribute to the doldrums the case is now experiencing.
When filing, the company listed debts that included a $942 million first-lien revolving credit facility, $1 billion in second-lien term notes and more than $2 billion in senior unsecured notes, with much of the liabilities coming from a 2011 leveraged buyout from the founding Schusterman family led by Kohlberg Kravis Roberts & Co. LP affiliates and investors Crestview Partners, Itochu Corp. and Natural Gas Partners.
Samson is represented by James H.M. Sprayregen, Paul M. Basta, Edward O. Sassower, Ross M. Kwasteniet, Brad Weiland, Yosef J. Riemer 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 1:15-bk-11934, in the U.S. Bankruptcy Court for the District of Delaware.
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