When an individual makes a bad decision it can be easy to survive the fallout and recover. However, when a business makes a bad decision, it can have disastrous consequences. Unfortunately for one Denver-based business, one of the consequences of their bad decision is an impending investigation.
Investigation into the Forest Oil Company comes after their merger with Sabine Oil and the untimely bankruptcy of Sabine just a few months later. Hedge funds that made an investment in Sabine Oil want to prove that the merger was done only to give certain creditors the upper hand over others. If the hedge funds are successful, they may get their money back at the expense of other lenders.
Just a few short months before Sabine Oil filed for Chapter 11 bankruptcy, they merged with Forest Oil in what seemed to be a solid business deal. However, now that Sabine has filed for bankruptcy, the creditor committee involved has called the deal a "disastrous business combination." Not only did it pin both companies with the others debt, but there are now questions regarding the manner in which senior lenders were given the rights to certain gas and oil wells.
A committee of creditors is now using the investigation as a way to identify violations in bankruptcy law that may have been committed during the Forest Oil merger. While Sabine is working collaboratively with the committee to investigate possible violations, they cite an increased debt load and energy slump as factors that lead to the bankruptcy, and not the desire to unequally benefit lenders.
For businesses faced with making major decisions, whether investments, purchases or mergers, speaking to a trusted business law attorney may help.
Source: Denver Post, "Denver-based Sabine Oil to cooperate with hedge funds in merger probe", Bloomberg News, Sep. 10, 2015