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Samson Resources leveraged loan, high yield debt at record lows amid restructuring reports

SIC_logoSamson Resources‘ debt continued to wallow around record lows today after press reports circulated about restructuring negotiations along two different paths. The issuer’s covenant-lite second-lien term loan due 2018 (L+400, 1% LIBOR floor) was little changed today, quoted at 31.5/33.5, while its 9.75% notes due 2020 held an essentially worthless valuation, at 4/5, according to sources.

Two separate groups of creditors are looking to raise capital for the KKR-backed E&P ahead of a looming Aug. 15 bond coupon payment date, according to a report by Bloomberg News, citing unnamed sources. The loan investors are shopping for a new facility to fund the company through a Chapter 11 bankruptcy, while a bondholder group is seeking cash to fund an out-of-court restructuring via some sort of debt swap, according to the report.

Silver Point Capital and Cerberus Capital Management are negotiating for holders of the $1 billion TLB, and the group has retained investment bank Houlihan Lokey and law firm Willkie Farr & Gallagher as advisers, according to the report.

The bondholder group, led by Blackstone Group’s credit business GSO Capital Partners, with Oaktree Capital Group and Centerbridge Partners, is seeking capital to help restructure outside of court supervision, according to the report. The proposal is for an exchange of the $2.25 billion bond issue into equity and new secured notes ahead of the second-lien TL, the report states.

As reported, Samson in February hired Kirkland & Ellis and Blackstone Group to advise on its capital structure and to address liquidity and leverage issues in the face of plunging commodity prices. (See “Samson Resources says Ch.11 could offer most ‘expeditious’ solution,” LCD News, March 31, 2015.) The TLB was in the low 50s at the time, while the bonds were in the low 20s.

Given the $2.25 billion size of the bond issue – tied for the 25th spot as a largest single tranche ever sold – the coupon payment due in 19 business days, or Monday, Aug. 17 given the weekend, is approximately $110 million.

Recall that S&P in April followed up with a downgrade of the company’s corporate credit rating to CCC-, from CCC+, and left the outlook as negative. Also, S&P cut its revolving credit facility to CCC+, with a recovery rating of 1, from B; lowered the second-lien debt to CCC-, with a 4H recovery rating, from CCC+, and downgraded the unsecured notes to C, with a 6 recovery rating, from CCC-.

Moody’s rates Samson Caa3 with negative outlook. The loans are rated Caa2, and the bonds are rated Ca. – Staff reports