KKR is about to lose its cash investment in Samson Resources worth $4.1 billion from its $7.2 billion buyout four years ago. The unexpected and prolonged downward move of oil and gas pushed Samson to file for Chapter 11.
Samson Resources is planning to file for Chapter 11 after suffering from the falling commodities prices this year. KKR invested in the Samson Resources buyout in 2011 on borrowed $7.2 billion fund until commodities started working against it.
Meanwhile, the biggest crude oil and natural gas private equity in the United States, Samsom Resources got stuck with $3.6 billion debt after the deal. The 44-year-old company was in debt for $695 million but had almost enough cash in hand to cover liabilities before the deal was struck. Industry experts predict a long-term low on crude oil prices while natural gas will continue to slump.
Bloomberg reports that Samson has a $110 million interest due on Aug 17 and will skip payment after entering a 30-day grace period. The company will be taken over by lenders Silver Point Capital LP, Cerberus Capital Management LP and Anschutz Investment Co. with a $1 billion loan. The loan will inject approximately $485 million to pay down the company's first lien and support operations.
Despite the serious circumstances being endured by KKR's investment in Samson, the buyout firm still seems capable of riding out the storm.
Brokerages rate KKR & Co. L.P. an average "buy" with $27.97 average price target. Goldman Sachs set a target price of $24 for the company and rating it as "neutral." Citigroup increased their target to $27.50 with a "buy" rating while Oppenheimer rated "outperform" and sets its target price to $33. KKR investors were paid $0.42 for its quarterly dividend which represents 7.39% dividend yield.
Samson Resources is the latest casualty of the harsh circumstances in the oil and gas saga of 2015. Samson is just among the private equities in the energy industry that are forced to file for bankruptcy.
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