Samson Resources' banks to gain ownership in new bankruptcy plan

By Tom Hals
May 17 (Reuters) - Samson Resources Corp, one of the largest
energy companies to file for bankruptcy in the commodity
downturn, proposed a new Chapter 11 exit plan on Tuesday that
would swap ownership of the natural gas producer to banks in
return for reducing debt.
The new plan slashes the recovery for junior lenders, who
were going to take ownership of the company under a prior
proposal that became unworkable as the company's value has
dwindled during its eight months in bankruptcy.
The proposal filed with the U.S. Bankruptcy Court in
Wilmington, Delaware, would slash Samson's $4.9 billion in
liabilities to approximately $535 million.
The banks that would become the owners of Samson include
affiliates of JPMorgan Chase & Co (NYSE:JPM) JPM.N , Bank of America Corp (NYSE:BAC)
BAC.N , Bank of Montreal BMO.TO , Citigroup Inc (NYSE:C) C.N and
Wells Fargo (NYSE:WFC) & Co WFC.N . The lenders would name six of seven
directors under the proposed plan.
The company also plans to perform a market test of certain
holdings to see if it is possible to increase recoveries for
creditors through asset sales.
Samson has struggled for more than a year to reach consensus
among its creditors to find a way to reduce its debts in the
face of sinking prices for natural gas.
Holders of the company's second-lien loan and unsecured
notes did not support Tuesday's proposal, which would give them
5 percent of the equity in the reorganized company if they vote
in favor, according to court documents.
The company filed for bankruptcy in September with an
agreement to swap equity ownership to holders of its $1 billion
second-lien loan. It said at the time it anticipated getting
court approval for its plan of reorganization by the end of
2015.
Samson, which has operations in the middle of the continent
from Texas to North Dakota, suspended its drilling of new wells
before it filed for bankruptcy. Without new wells, the company's
reserve assets have been steadily shrinking.
The company's plan of reorganization forecasts declining
production and assets through 2021.
The plan documents need to be approved by the U.S.
Bankruptcy Court before they are sent to creditors for a vote.
Samson was acquired by a group led by KKR & Co KKR.N in
2011 in a buyout valued at $7.2 billion, which was one of the
largest deals for a shale-focused energy producer.
Natural gas prices have fallen more than 60 percent since
their peak in 2014.