Sanchez Energy creditor groups blast choice for restructuring officer

By Caroline Salls

Pittsburgh, Dec. 6 – Sanchez Energy Corp.’s official committee of unsecured creditors and an informal group of holders of the company’s unsecured notes objected to Sanchez’s proposed hiring of M-III Advisory Partners, LP and designation of Moshin Y. Meghji as the company’s chief restructuring officer, according to Thursday filings with the U.S. Bankruptcy Court for the Southern District of Texas.

The creditors committee said in its objection that “the first priority in these cases must be to untangle the debtors’ relationships with their executive and with their executives’ other business interests.”

The committee said its membership and that of informal group’s formed by holders of Sanchez’s secured and unsecured notes believe that “only oversight by an independent chief restructuring officer can give confidence to the non-insider stakeholders that the debtors are responsibly managing their relationships with the Sanchez family.

In fact, the committee said the creditor groups unanimously agreed in mid-October on a qualified, credible candidate to fill that role. However, the committee said an independent special committee of Sanchez’s board rejected the groups’ choice for CRO and allowed the Sanchez family to influence the selection of the proposed candidate.

“It is therefore difficult to conclude that the selection process was anything other than a sham,” the committee said in its objection.

Meanwhile, the unsecured noteholders said in their objection that the group’s previously filed examiner appointment motion details conflicts of interest among the Sanchez debtors and the Sanchez family, which the noteholders said “have allowed the Sanchezes to divert substantial value from the debtors and their estates through improper asset transfers, oppressive intercompany contracts and excessive executive and director compensation.”

The noteholder group said the company’s motion to appoint a CRO is its latest attempt to protect the Sanchez family and frustrate creditors.

Since the proposed CRO would report to the special committee that picked him, the noteholders said he will not be able to alleviate the existing conflicts.

Sanchez is a Houston-based oil and gas exploration and production company. The company filed bankruptcy on Aug. 11 under Chapter 11 case number 19-34508.

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