Sabine Oil plan cuts debt to $350M from $2.8B
By Tom Hals
WILMINGTON, Del., July 27 (Reuters) -A U.S. Bankruptcy judge said on Wednesday 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 Wednesday 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 they say 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 numerous 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 in 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. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Amy Stevens and Leslie Adler)