Samson Rips Creditors' Ch. 11 Control Move, Urges Sanctions

Samson Resources Corp. and key lenders lashed out Wednesday against an unsecured creditor committee move to end the company’s exclusive control over its Chapter 11 planning, with the company suggesting sanctions against the group for interfering with sale solicitations.
 
A company objection filed in Delaware bankruptcy court said the proposal, filed May 25, would “upend a year’s worth of restructuring negotiations” and jeopardize a settlement that would shift some of the company’s debt into equity while providing financing for a stable exit from bankruptcy.
 
The unsecured creditor group said it wanted the court to end Samson’s exclusive plan-filing right so it could file an alternative restructuring plan that would be fairer and increase recoveries for its members. Consideration of the alternative could avert a potentially costly fight over what the committee characterized as an unconfirmable plan.
 
Samson said the committee “filed a lengthy pleading trashing the debtors’ business and the value of their assets and seeking to unleash procedural chaos” as the company was pursuing a first round of asset sales. The move, Samson said, amounted to interference with company efforts warranting court sanctions.
 
“The motion is a meritless, dilatory litigation tactic meant to exert pressure on the debtors and the first-lien secured parties, and one that threatens to turn this already incredibly expensive and delayed process into a free-for-all,” JPMorgan Chase Bank NA, agent for first-lien secured parties, said in its own critique and objection to the committee proposal.
 
In a separate filing, the Office of the U.S. Trustee challenged a committee proposal to seal a term sheet for the alternative plan and list possible litigation that the estate could pursue. Trustee attorney David L. Buchbinder wrote that all or most of the information would be included in public filings for the alternative plan, and said the information was needed to assess the claimed benefits of the alternative plan.
 
Samson’s objection also noted the committee’s litigation aims, saying the group “advocates a plan strategy based on meritless litigation, with the goal of stripping the secured lenders of the liens securing their claims and allowing bondholders to buy the company for a fraction of its value.”
 
Deutsche Bank Trust Co. Americas, administrative and collateral agent for Samson’s second-lien term loan credit agreement, said it viewed Samson’s current plan as unconfirmable and disputed the plan’s treatment of second-lien creditors. But Deutsche Bank nevertheless disagreed with the push to break Samson’s lead.
 
“Global settlement may be aspirational in this case, but it will never be possible if the committee is permitted to file its own unconfirmable plan and stage a two-plan solicitation and confirmation battle,” the bank said.
 
Samson filed for Chapter 11 protection in September, about six months after it suspended its drilling activities, and listed more than $4 billion in debt, including a $942 million first-lien revolving credit facility, $1 billion in second-lien term notes and more than $2 billion in senior unsecured notes.
 
A large share of the liabilities come from a 2011 leveraged buyout from the founding Schusterman family led by Kohlberg Kravis Roberts & Co. LP affiliates and investors Crestview Partners, Itochu Corp. and Natural Gas Partners.
 
The committee reported that its investigations into claims and causes of action against the plan’s sponsors revealed “significant issues” involving the LBO, associated collateral grants by secured lenders at the time of the LBO, and lender conduct afterward.
 
A hearing on the unsecured creditor committee motion is scheduled for June 14.
 
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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