Last week, Samson Resources Corp., one of the largest oil and gas companies in the country, announced plans to file for Chapter 11 bankruptcy protection.
According to Oil and Gas Investor magazine, Samson Resources will reach a deal with lenders to restructure its $4.15 billion debt.
The company is one of several fracking organizations across the country that are struggling with high levels of production and low demand, which is driving down prices. As a result, Samson Resources informed creditors that it will not be able to fulfill its $110 million interest payment on its unsecured bonds by Aug. 15.
According to the New York Post, KKR & Co., the parent company of Samson Resources, claimed it stands to lose its $2 billion investment in the natural gas producer. KKR bought the company in 2011 for $7.2 billion, but the Post reported that the firm saddled Samson Resources with over $3.6 billion in debt.
As a result, the Trade Reporting and Compliance Engine reported that Samson Resources’ 9.75 percent senior unsecured bonds recently traded at 4.5 cents on the dollar, representing a 34 cent drop from 2014. Compounding this collapse was the fact that Samson’s $1 billion term loan due in 2018 was recently quoted at 33.3 cents on the dollar, falling from 78.6 cents from the start of the year.
The restructuring plan
In court papers, the company claimed that second-lien lenders led by Cerberus Capital Management, Silver Point Capital and Credit Suisse will take control of the company with a combination of senior notes and equity in exchange for loans as part of a prepackaged bankruptcy agreement. The creditors will then invest more than $300 million to pay down the $947 million owed to senior lenders, while senior lenders will issue new loans to Samson during the restructuring process to maintain operations. The Post also reported that the $2.25 billion owed to junior lenders will be wiped out.
Similarly, the company is also seeking agreements with two groups of creditors to inject additional capital that would enable Samson to service the remainder of its debt obligations following bankruptcy proceedings.
Currently, senior lenders are in the process of developing an alternative plan that would hand over company control in a court restructuring process, which would significantly reduce value for lower-ranking investors.