'Nightmare' $4B Samson Ch. 11 Finds Route To Peace, Exit
An energy sector bankruptcy that one attorney termed “a complete nightmare” at times landed on a path to peaceful plan confirmation Thursday, with a Delaware bankruptcy judge approving Samson Resources Corp.’s heavily negotiated public disclosures for a $4 billion debt restructuring.
Under schedules approved by U.S. Bankruptcy Judge Christopher S. Sontchi, Samson’s plan would take effect on Feb. 28, following a confirmation hearing at noon on Feb. 13 — a goal that often appeared unreachable for a case that at one point had full-blown, dueling plans in play that called for restructuring or liquidation.
“This has been a very long, expensive and difficult case that’s been plagued not only by disagreement on just about every issue but at times almost-irrational distrust among the parties,” said Ana M. Alfonso of Willkie Farr & Gallagher LLP, counsel for second-lien lender creditor agent Deutsche Bank Trust Company Americas. “Just about everything, including negotiation of a settlement, has been a complete nightmare to try to get through.”
By Thursday, however, Judge Sontchi labeled the oil and gas company’s bankruptcy case “all good news” as Samson's attorney Ross M. Kwasteniet of Kirkland & Ellis LLP detailed final changes to his client’s proposed global settlement.
The agreement includes a $670 million payment to Samson's first-lien lenders within five days or "as soon as reasonably practicable" after an approval order, subject to lender agreement to support the deal and an associated exit financing plan.
A company stipulation and disclosure statement filed with Judge Sontchi's court said that first-lien lenders will ultimately be paid their full $945.8 million claim, with cash as well as new secured debt and proceeds from asset sales, if any.
Andrew Kidd, Samson's president, CEO and general counsel, released a brief statement following the court’s approvals, saying, “We are pleased our continued dialogue with creditors has culminated in a solution agreed by all parties and look forward to completing the restructuring in the near term with a sustainable financial structure in place.”
Second-lien lenders will receive all the company's equity and 22 percent of the group's more than $1 billion in claims, while unsecured creditors will receive between $168.5 million and $180 million, to be funded from asset sales, proceeds from a second-lien lender's new money rights offering, and a letter of credit, if needed.
The low-key disclosure approval, delayed by about three hours by last-minute changes, capped months of high-stakes battling touched off by Judge Sontchi’s termination of Samson’s exclusive Chapter 11 control on Sept. 27.
That cutoff came during a hearing where the judge declared that “the debtors have not engaged constructively, or even in good faith, with the official committee of unsecured creditors. They have continued to dominate negotiations and control of the case in an inappropriately aggressive way.”
As recently as Dec. 28, unsecured creditors were still advancing a proposal to sell Samson assets not already sold at auction, and arguing to retain rights to pursue lawsuits for recovery of some of the $7 billion that Samson paid in a 2011 leveraged buyout. The deal left the company lugging $3.7 billion in debt.
Unsecured creditors committee counsel Thomas E. Lauria of White & Case LLP said final negotiations focused heavily on retention of rights to sue those liable for the company's troubles, and on the dispute over liquidation or reorganization of Samson and allocation of estate proceeds and settlement rights.
The compromise approved Thursday created a settlement trust for proceeds from litigation or settlement of legal claims retained after the Chapter 11 exit. The deal also grants unsecured creditors a bump up in their recovery from an initial $168.5 million to $180 million, plus accrual of simple interest, if the trust fails to meet specified amounts by June 30.
“It’s very much a hybrid transaction that we put together,” Lauria said.
Under the revised version of the disclosure filed Wednesday, general unsecured creditors will recover from 7 to 7.5 percent of their more than $2.4 billion in allowed claims, up from the 4.7 to 5.3 percent that had been proposed in the previous restructuring blueprint.
Samson became one of the larger energy producers to seek protection from creditors in U.S. bankruptcy courts in the wake of the oil and natural gas price slump of recent years. The company operates or has royalty or working interests in about 8,700 oil and gas wells, and filed for Chapter 11 protection in September 2015.
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 official unsecured creditors 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.
First-lien agent JPMorgan Chase Bank NA is represented by Jeffrey M. Schlerf and L. John Bird of Fox Rothschild and Sean T. Scott, Aaron Gavant and Tyler R. Ferguson of Mayer Brown LLP.
Second-lien agent Deutsche Bank Trust Company Americas is represented by John H. Knight, Amanda R. Steele and Joseph C. Barsalona II of Richards Layton & Finger PA and Ana M. Alfonso of Willkie Farr & Gallagher 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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