A New York federal judge Monday denied an attempt by Sabine Oil & Gas Corp.'s unsecured creditors to appeal its reorganization plan, saying the plan is already largely complete.
U.S. District Judge Loretta Preska’s opinion said the reorganization of the oil company has made too much progress in the last six months to allow the creditor’s appeal through.
“Because the plan of reorganization has been substantially consummated and unravelling the settlement would both frustrate debtor’s emergence from bankruptcy and require unwinding complex transactions in an unfeasible manner, the court finds the appeal of the consummation order is equitability moot,” she said.
Sabine filed for bankruptcy in July 2015, listing assets of $2.5 billion and prepetition debt obligations of $2.77 billion.
U.S. Bankruptcy Judge Shelley Chapman in March denied motions that would have given the officials committee of Sabine’s unsecured creditors and a number of banks standing to bring litigation against the company's secured lenders over its ill-fated merger with Forest Oil that added substantial new debt to the business before it filed for Chapter 11.
In October, U.S. District Judge John G. Koeltl denied a bid by the unsecured creditors and trustees for notes issued by Sabine and Forrest Oil to appeal the approval of Sabine’s second amended Chapter 11 plan of reorganization. Judge Koeltl said the attempt to skip the district court’s review of the approval would only avoid the time and effort in litigating the issue in the district court, which is an insufficient reason to bypass the two-step appellate process.
Judge Preska argued the latest appeal had been rendered moot by the fact the reorganization is almost complete. She said the reorganization began in August and by September the company’s board of directors had been replaced, its common stock and $2.7 billion in debt had been canceled and the reorganized company had assumed some of the old company’s contracts and obligations, established a new line of credit and issued new stock to the majority of the former shareholders.
“Appellants respond by arguing that ‘the plan has not been consummated in a meaningful manner’ and that the actions taken pursuant to the reorganization plan represented a mere ‘mirage of paper transactions.’” she said. “Considering the wide-ranging equity and cash distributions outlined above, appellant's argument lacks credibility.”
Sabine Oil & Gas is represented by Gabor Balassa, Adrianne Katrine Jakola, Paul Basta, Jonathan S. Henes, Christopher Marcus and James H.M. Sprayregen of Kirkland & Ellis LLP.
The official committee of unsecured creditors is represented by Christopher Thomas Brown, Justin Florence, Douglas H. Hallward-Driemeier, D. Ross Martin, Mark Rodney Somerstein and Keith Howard Wofford of Ropes & Gray LLP.
The Bank of New York Mellon Trust Co., Wilmington Savings Fund Society and Delaware Trust Co. are represented by Lawrence S. Robbins and Mark T. Stancil of Robbins Russell Englert Orseck Untereiner & Sauber LLP.
The case is in Re: Sabine Oil & Gas Corp., case number 1:16-cv-02561, in the U.S. District Court for the Southern District of New York.
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