Landowners who lease land to bankrupt driller Samson Resources Corp. are asking a U.S. trustee to set up a special committee for them in the bankruptcy proceeding, saying some royalty payments have been short.
A “representative” group of 17 landowners wrote to Delaware U.S. Trustee David Buchbinder to ask for a statutory committee to make sure their interests, and the interests of at least 50,000 others, were properly protected as Samson reorganizes. It filed for Chapter 11 in September with more than $3 billion in debt, much of it from a failed leveraged buyout.
“Realistically, the absence of a statutory committee will result in a lack of participation, or worse, misrepresentation of the claims and interests of the collective group of landowner-creditors. Either result, given the significance of landowner-creditor interests in these cases, would be untenable,” the landowners said.
They say some landowners have reported improper deductions from royalty checks, and if it's a widespread issue it could add up to a $3 billion claim.
“It underscores the importance of an investigation into such allegations before there is any discharge of the debtors,” they said.
Further, they say the bar date for notices gave recipients almost no time to respond and file claims, arriving over the holidays with tight deadlines.
They say the trustee has already asked for an examiner, which would help landowners, and that the committee would help them even more. Additionally, the unsophisticated landowners would not be able to sort out Samson's "complex accounting methodology" without the help, according to the group.
Meanwhile, in December, a Delaware bankruptcy judge sided with Samson over the retention of Skadden Arps Slate Meagher & Flom LLP to represent one of its directors. U.S. Bankruptcy Judge Christopher S. Sontchi rejected arguments from the official committee of unsecured creditors that Skadden would be conflicted if the firm represented independent director Alan Miller as he looked into whether Samson had claims connected to the 2011 leveraged buyout that left it billions of dollars in debt.
The committee had argued that Skadden advised Vulcan Inc., a participant in the 2011 LBO, and that the old client sits among a group of equity sponsors that controls the board and has interests that conflict with the company's own.
The young case has already seen its share of turmoil. Samson has said the restructuring agreement with lenders it entered court with is in danger of collapsing as energy commodity prices continue to tumble. Since Samson filed in September, the price of oil has gone down 22 percent and the price of natural gas dropped even further, Joshua Sussberg of Kirkland & Ellis LLP, representing Samson, has said.
When Samson filed for bankruptcy, its debts 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.
Much of the liabilities came 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.
The September 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 is represented by James Sprayregen, Paul Basta, Edward Sassower, Ross Kwasteniet, Brad Weiland, Yosef Riemer and Joshua Sussberg of Kirkland & Ellis LLP and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP.
The committee is represented by Joseph Farnan Jr., Joseph Farnan III and Michael Farnan of Farnan LLP and Thomas Lauria, Glenn Kurtz, J. Christopher Shore, Michele Meises and Thomas MacWright of White & Case LLP.
The landowners are represented by Scott Gautier of Robins Kaplan 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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