A Delaware bankruptcy judge on Tuesday gave the go-ahead to begin the Chapter 11 confirmation battle for Samson Resources Corp. in March after approving its disclosure statement and a competing one proposed by unsecured creditors, setting up a head-to-head fight over how to reorganize the company’s $4 billion in debt.
During a hearing in Wilmington, U.S. Bankruptcy Judge Christopher S. Sontchi scheduled the confirmation start date for March 6, for a trial that is expected to last about eight court days and will pit Samson’s restructuring strategy that centers on a second-lien note debt-for-equity swap against a competing proposal from the official committee of unsecured creditors that essentially calls for a liquidation.
Judge Sontchi set the hearing after calling a recess to have a “liquid and fluid conversation” with counsel in chambers during what were becoming heated arguments over the best way forward, and despite dire warnings from Samson that it could run into a liquidity crisis if its proceedings were pushed out beyond February.
The judge also gave the verbal OK for the disclosure statements and solicitation procedures for both plans, but noted there may be some details to work out in the final orders.
The scheduled confirmation hearing is set to be one of the rare instances where two competing Chapter 11 plans will go head-to-head before the court, and each must be measured not only by their feasibility and how well they comport with the Bankruptcy Code, but by which is in the better interests of the debtor and its creditors.
The creditors committee took the opportunity to file its own Chapter 11 plan after Judge Sontchi in September denied Samson an extension of the exclusive time period it has to control the destiny of its case.
The judge said that Samson hadn’t dealt with the unsecured creditors in good faith and had taken an aggressive approach to the constituency.
Enmity between the unsecured creditors and Samson has only grown during the case, with an attorney for the committee calling the debtor’s plan a “declaration of war,” and Samson at one point seeking sanctions on accusations the creditors were interfering with sale solicitations.
Unsecured creditors have been seeking to challenge senior secured creditors’ liens and targeting Samson's 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, as well as an additional $3 billion in second-lien debt it had to take just nine months later.
Those tensions ripped open Tuesday, with Samson arguing the committee’s plan would destroy the debtor’s value and wipe out roughly 300 jobs.
The committee’s plan proposes selling all of Samson’s assets and prosecuting its causes of action, distributing proceeds from both methods to claims holders.
Committee attorney Thomas E. Lauria of White & Case LLP said he didn’t envision the confirmation hearing as a battle of the experts over liquidation value versus going-concern value so much as the unsecured creditors bringing in potential bids for the assets.
Samson filed for Chapter 11 protection in September 2015, listing more than $4 billion in debt, much of it from the leveraged buyout, and citing many of the same bearish forces in the energy commodity market that have sent many of its peers flocking into bankruptcy court.
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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