Gastar preferred stockholders seek official committee representation

By Caroline Salls

Pittsburgh, Nov. 5 – An informal committee of Gastar Exploration Inc. preferred equityholders asked the U.S. Bankruptcy Court for the Southern District of Texas to appoint an official committee of preferred stockholders to represent them in the Gastar Chapter 11 cases, according to a motion filed on Friday.

The preferred stockholders said they were “generally supportive” of Fir Tree Capital Management LP and York Capital Management Global Advisors, LLC’s motion for appointment of an equityholders committee, but “it must be noted, however, that the preferred stock is entitled to payment of a liquidation preference that is in all respects paid before and senior to any recovery to common stock.”

The committee said Gastar lists the liquidation preference on the preferred stock as of its bankruptcy filing date as $154.6 million, and any confirmed Chapter 11 plan must pay this amount in full before any distribution is made to holders of common stock.

“It is therefore imperative that any official committee of equity security holders be comprised exclusively or predominantly of preferred stock, whose contractual entitlement to a liquidation preference is being eliminated under the plan proposed by the debtor and Ares Management, LLC,” the motion said.

In addition, the committee said it believes that it is likely that the value of Gastar’s assets is significantly higher than implied in the proposed plan and that holders of preferred stock should be entitled to a larger distribution than provided for in the plan.

“After not being permitted to negotiate with the debtor and Ares pre-petition regarding the proposed plan, it is entirely reasonable for the court to require the appointment of an official committee of holders of preferred stock so the valuation underlying the plan can be tested,” the motion said.

“The responsibility for testing the plan valuation and the assumptions underlying it, including, among other things, the allowance of Ares’ claimed make-whole and yield maintenance amounts, must be entrusted to an adversary that can represent the interests of preferred stock diligently.

“The debtor has all but admitted that it cannot be trusted to serve this function, thus it is necessary that an official committee be appointed to do so.”

The informal committee has requested a Nov. 7 hearing.

Gastar Exploration is Houston-based oil and natural gas company. The company filed bankruptcy on Oct. 31 under Chapter 11 case number 18-36057.

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