Samson Resources Corp. has entered into a restructuring support agreement (RSA) with certain second lien lenders that hold 45.5% of the second lien obligations and existing equity owners. The proposed balance sheet restructuring would reduce Samson Resources’ overall indebtedness and result in an investment of at least $450 million of new capital into the business.
As a result of the RSA, Samson Resources will not make the interest payment due under its senior notes indenture on Aug. 17. Instead, the company intends to use the 30-day grace period to build broader support for the restructuring and continue efforts to document and ultimately implement the reorganization transaction as part of a Chapter 11 filing.
Samson Resources has been, and continues to, work closely with its suppliers and business partners to ensure that business continues uninterrupted. The company expects and intends to continue producing oil and gas from its existing operations, maintain its current staffing, and pay royalties at all times.
“Although Samson Resources has completed a series of initiatives to strengthen our business during this difficult and extended period of low commodity prices, we – like many of our peers – have not been able to overcome industry headwinds that significantly reduced our cash flows, limited our ability to reinvest in our assets and prevented us from selling non-core assets as we had planned,” said Randy Limbacher, CEO and director of Samson Resources. “The actions we are now taking will allow us to not only weather the current storm but also to provide a strong foundation that will enable us to capitalize on future opportunities with significantly less debt on our balance sheet and a near-term infusion of new capital to provide additional liquidity.”
Under the terms of the RSA, second lien lenders, including Silver Point, Cerberus, and Anschutz, have agreed to invest at least $450 million of new capital to provide liquidity to the balance sheet post-reorganization and permanently pay down existing first lien debt. The additional investment in Samson Resources may be increased in certain circumstances by $35 million to an aggregate of $485 million to further bolster liquidity.
As part of the restructuring and recapitalization, Samson Resources’ second lien lenders, together with the second lien lenders that are backstopping the equity rights offering, will own all of the equity in the reorganized company, and all second lien lenders will have the right to participate in the new money investment.
The RSA contemplates that the restructuring would be implemented through a plan of reorganization under Chapter 11 of the US Bankruptcy Code.