A U.S. Bankruptcy judge said on July 27 that she would approve Sabine Oil & Gas Corp.'s plan of reorganization, which would clear the way for the Texas energy producer to exit Chapter 11 after a year-long battle with its creditors.
U.S. Bankruptcy Judge Shelley Chapman in Manhattan said at a status conference on July 27 that she would approve the plan and was working on an opinion that would explain her reasoning, according to her courtroom deputy, Greg White.
Sabine's plan cuts the company's debt to $350 million from $2.8 billion, with its lenders ending up with almost all of the company's stock when Sabine emerges from bankruptcy.
Unsecured creditors of the Houston-based company will get a sliver of the company's stock and warrants, amounting to pennies on the dollar for the $1.4 billion the creditors said they were owed.
The case has been unusually contentious, with Sabine and its lenders squaring off against the official committee of unsecured creditors, led by Aurelius Capital Management, a firm which spent years battling Argentina over its defaulted bonds.
Sabine's plan of reorganization was premised on settling disagreements with its lenders that turned on the question of the value of the lenders' collateral. The creditors' committee said Sabine would have been better off litigating against its lenders rather than settling.
One bankruptcy lawyer said similar fault lines are developing in several of the dozens of pending bankruptcies involving energy producers.
"I think you'll see it in more [energy] cases where unsecured creditors, who may not receive anything, are attempting to use any leverage they can to create any value they can for themselves," said Barney Given, a bankruptcy lawyer with Loeb & Loeb. He was not involved in the Sabine case.
Falling energy prices have undermined the value of reserves that many producers borrowed against, leaving banks nursing unexpected losses and unsecured creditors struggling to get repaid anything.
The fighting within Sabine may not be over. Lenders plan to contest the fees paid to lawyers and advisers for the creditors' committee, according to court documents.
In March, Chapman ruled that Sabine could shed certain pipeline contracts, upending a long-held view by midstream operators that their agreements to gather and transport natural gas were bankruptcy-proof.
Recommended Reading
Some Payne, But Mostly Gain for H&P in Q4 2023
2024-01-31 - Helmerich & Payne’s revenue grew internationally and in North America but declined in the Gulf of Mexico compared to the previous quarter.
Green Swan Seeks US Financing for Global Decarbonization Projects
2024-02-21 - Green Swan, an investment platform seeking to provide capital to countries signed on to the Paris Agreement, is courting U.S. investors to fund decarbonization projects in countries including Iran and Venezuela, its executives told Hart Energy.
Shell’s CEO Sawan Says Confidence in US LNG is Slipping
2024-02-05 - Issues related to Venture Global LNG’s contract commitments and U.S. President Joe Biden’s recent decision to pause approvals of new U.S. liquefaction plants have raised questions about the reliability of the American LNG sector, according to Shell CEO Wael Sawan.
BP Pursues ‘25-by-‘25’ Target to Amp Up LNG Production
2024-02-15 - BP wants to boost its LNG portfolio to 25 mtpa by 2025 under a plan dubbed “25-by-25,” upping its portfolio by 9% compared to 2023, CEO Murray Auchincloss said during the company’s webcast with analysts.
Sunoco’s $7B Acquisition of NuStar Evades Further FTC Scrutiny
2024-04-09 - The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act for Sunoco’s pending acquisition of NuStar Energy has expired, bringing the deal one step closer to completion.