The committee representing Samson Resources Corp.’s unsecured creditors on Tuesday sought to wrest control of the oil driller’s Delaware Chapter 11 case from the company’s secured lenders, accusing Samson of using tools in the restructuring to secure broad liability releases for private equity owners over a 2011 leveraged buyout.
The official committee of unsecured creditors filed court papers seeking to terminate the exclusive period in which Samson can submit a Chapter 11 plan. The committee says it has an alternative restructuring proposal that is more fair to all of Samson’s financial stakeholders and would boost recoveries for unsecured creditors.
The committee said Samson’s plan also includes a stick that coerces unsecured creditors to accept the terms of the proposed restructuring or receive no recovery if they choose to vote against it. In court papers, the committee called the structure “a coercive deathtrap mechanism.”
The committee said it floated a proposal earlier this month that would give the first-lien debtholders a $525 million first-lien loan and would “immediately” pay down the first liens’ secured claims by $225 million upon the effective date of a Chapter 11 plan. The alternative proposal also contemplates $150 million in newly issued senior convertible unsecured notes and preferred stock, the committee said.
The committee’s proposals would benefit unsecured creditors, which would see a boost in their expected recoveries to 20 percent, court documents say. But unsecured creditors said the proposal has been rebuffed by more senior lenders.
In Wednesday’s filing, the committee accused Samson, its attorneys at Kirkland & Ellis LLP and more senior lenders of using the exclusivity period to secure broad releases for private equity owners led by Kohlberg Kravis Roberts & Co. LP related to a 2011 leveraged buyout.
Samson’s plan, the committee said, doesn’t provide any consideration to the estate’s creditors’ in exchange for the liability releases. Taking issue with the releases for Samson’s LBO sponsors, the committee asked, “When was the last time Kirkland & Ellis filed a plan that did not release sponsors for free?”
When Samson filed for bankruptcy, 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.
Samson could not immediately be reached for comment.
A hearing on the matter is scheduled for June 7.
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 White & Case LLP and Farnan 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.
REPRINTED WITH PERMISSION FROM THE MARCH 25, 2016 EDITION OF LAW360 © 2016 PORTFOLIO MEDIA INC. ALL RIGHTS RESERVED. FURTHER DUPLICATION WITHOUT PERMISSION IS PROHIBITED. WWW.LAW360.COM