Samson Resources Corp.’s unsecured creditor panel fired a legal broadside at the company’s Chapter 11 case late Friday in Delaware bankruptcy court, seeking court approval to open fraudulent conveyance and lien challenge actions on the bankruptcy estate’s behalf, with $1.5 billion or more at stake.
The motions for authority to file exclusive derivative claims — with the committee acting in place of the company — teed up a dispute set for a hearing on Sept. 7, potentially opening a new chapter in the $4.2 billion proceeding.
Samson, which operates or has royalty or working interests in about 8,700 oil and gas wells, sought protection from creditors in September 2015 and immediately faced claims that its troubles stemmed from an $8 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.
The committee’s motion described the LBO as “epically failed” and said the fraudulent conveyance action would also focus in part on a $3 billion emergency second-lien debt filed just nine months afterward.
“To date, the debtors and their advisors have, with unwavering purpose, sought to forestall any and all attempts to challenge the secured nature of the claims” in the case, the unsecured creditors said.
Samson, they said, waived its right to pursue the same allegations in earlier agreements that gave the company access to cash needed to manage its bankruptcy case.
“By stipulating to the validity of the proposed claims, the debtors voluntarily waived their ability to negotiate and settle the proposed claims for any value, and certainly cannot now negotiate a settlement at arm’s length,” the committee said.
Named in the proposed fraudulent conveyance and declaratory judgment lien challenge actions were JPMorgan Chase Bank NA and Deutsche Bank Trust Co. Americas as past or present credit administrative agents and up to 1,000 yet-to-be-named John Does.
Samson officials could not be reached for comment late Monday, but last month Samson attorney Ross M. Kwasteniet of Kirkland & Ellis LLP noted a difference of opinion with unsecured creditors over the company’s exclusive control of the case and confirmation schedule.
Samson opened a second round of bid solicitations for its assets, Kwasteniet said, with a possible minimum-bid stalking horse auction to be developed for late October.
The unsecured creditor committee’s latest actions noted allegations of constructive fraud, rather than intentional fraud, and said that the goal of the litigation will be to have all property or cash transferred back to the state for the benefit of creditors.
According to the committee, Samson systematically transferred interest in company property to lenders in exchange for cash or loans needed to execute a “doomed” business plan.
“The debtors have unreasonably refused to prosecute any claims or causes of action in the proposed complaints,” it said. “Any demand on the debtors would be futile because they waived their right to assert such claims in the interim cash collateral orders.”
Costs of the fraudulent conveyance and lien actions could range from $9 million to $16.25 million but could yield far greater returns, the committee said.
“The pursuit of the proposed claims are likely to benefit the debtors’ estates because the complaints allege damages in the billions of dollars and seek to avoid liens securing claims worth billions more,” it said.
A separate table in the committee’s heavily redacted filings estimated that the fraudulent conveyance actions alone could recover from $500 million to $1.5 million.
The 16-count complaint for declaratory judgement seeks rulings that would nullify improperly perfected liens and require recharacterization or release of wrongly issued payments to assure that creditor collateral is adequately covered.
In a separate development, Samson has asked the court to approve a continuation of the company’s employee retention program for non-insiders, with modifications to one that has rewarded employees for staying on since last year.
The extended proposal would pay $5.4 million to key non-insiders and general workforce employees between Aug. 16 and Dec. 31, with an additional $3.4 million paid quarterly afterward until the company’s exit from bankruptcy.
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 J. Farnan Jr., Joseph J. Farnan III and Michael J. Farnan of Farnan LLP and Thomas E. Lauria, Glenn M. Kurtz, J. Christopher Shore, Michele J. Meises and Thomas MacWright of White & Case 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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