Sabine Oil & Gas creditors committee objects to cash collateral use

By Mark Reccek

Bethlehem, Pa., Aug. 20 – Sabine Oil & Gas Corp.’s official committee of unsecured creditors objected to the entry of interim and final orders authorizing the company’s use of cash collateral and scheduling a final hearing on the matter, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

The cash collateral from the company’s first-lien and second-lien lenders will be used to fund its operations while in bankruptcy.

Sabine has a cash balance of approximately $253 million, according to the motion.

The committee in the motion principally argues the adequate protection package is unnecessary, redundant and impermissible pursuant to law.

Additionally, the committee said it must be provided sufficient opportunity to investigate causes of action against the secured lenders and other parties.

“In the likely event that none (or very little) of the disputed cash is cash collateral, the lenders are not entitled to any extraordinary adequate protection and lender concessions beyond adequate protection liens on unencumbered assets,” the motion said. “The debtors’ desire to delay litigation in the near term should not come at the long-term costs of compromising the substantive rights of unsecured creditors in a cash collateral order that is intended to maintain the status quo and protect all creditors’ rights, secured and unsecured alike.

As previously reported, Sabine said it expects that its cash on hand, combined with funds generated from ongoing operations, will provide sufficient liquidity to support the business during its balance sheet restructuring process.

The company’s access to the cash collateral and disputed cash will expire on the earliest of Jan. 15, subject to an extension to Feb. 15, 45 days from the bankruptcy filing date if a final order has not been entered and occurrence of a termination event.

A hearing on the matter is scheduled for Sept. 10.

Formerly Forest Oil Corp., Sabine is an oil and gas company based in Houston that filed for bankruptcy on July 15. The Chapter 11 case number is 15-11835.

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