`Furious' Samson Judge Rebukes Banks for Collateral Demand

Updated on
  • Samson's lenders lose bid for collateral rights to assets
  • Judge accuses lenders of threatening to kill company

Samson Resources Corp. lenders received a sharp rebuke at the company’s initial bankruptcy hearing, when a judge said they made him “furious” by asking for too much too soon in the oil-and-gas driller’s reorganization effort.

On Samson’s first day in court since filing for Chapter 11 protection, U.S. Bankruptcy Judge Christopher Sontchi refused to give the company’s senior lenders certain collateral rights over assets that weren’t already backing any debt.

“You are asking for something I don’t want to give you, and you’re saying you are going to kill the company if I don’t give you want you want,” Sontchi said Friday in Wilmington, Delaware. “This was not the way to start our relationship.”

The Tulsa, Oklahoma-based company is planning for a quicker-than-normal trip through bankruptcy after cutting a deal with a group of second-lien lenders that requires Samson to win Sontchi’s approval for reorganization by Dec. 15.

KKR & Co.

Samson is co-owned by private-equity company KKR & Co. Sontchi is presiding over the bankruptcy of another KKR investment, Energy Future Holdings Corp., which also had a rocky start to its Chapter 11 case. Energy Future entered court oversight in April 2014 with a deal with creditors to try to reorganize quickly, but Sontchi ruled against the company on a key legal issue, adding about a year to KKR’s original bankruptcy timeline.

A few minutes after hearing Sontchi’s rebuke, attorneys for the lenders’ agents backed down, saying they had erred by giving the judge the impression that they were threatening to block the company’s access to enough cash to keep operating.

“I heard what your honor said,” said Sean T. Scott, an attorney for JPMorgan Chase Bank NA. The bank is the administrative and cash collateral agent for Samson’s senior lenders.

“We are conceding,” Scott said.

Samson had asked Sontchi to let the company spend cash that is being held as collateral for senior lenders. When lawyers for the senior lenders said they wanted the additional collateral rights, Sontchi accused them of threatening to force the company into liquidation.

After the bank lenders’ comments, Sontchi approved a request to use the cash without granting the collateral rights. He also approved a series of routine bankruptcy-court motions so the company could pay its employees and continue operating normally.

Unsecured Creditors

Unsecured creditors and the U.S. Trustee, which oversees bankruptcy cases for the government, had opposed the collateral rights, saying they would tie up assets at the start of the case.

Samson filed bankruptcy Sept. 16, saying it had a deal with senior lenders to reorganize by giving them ownership of the oil and gas driller in return for debt reduction. That proposal would wipe out the $2.3 billion owed to unsecured noteholders and give them 1 percent or less of the company in return.

Attorneys for the noteholders told Sontchi Friday that they plan to fight the reorganization proposal.

The case is In re Samson Resources Corp., 15-bk-11934, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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