Jason Mudrick, the chief investment officer at Mudrick Capital Management LP, is sending distress signals about the firm’s holdings in unsecured debt of Lightstream Resources Ltd., Bloomberg News reported today. As things stand, those holdings would be almost wiped out by a rescue plan designed to cut debt by $904 million for the Canadian oil producer. The plan pits Mudrick’s $1.3 billion hedge fund against some of the world’s biggest distressed-debt investors at Apollo Global Management LLC and Blackstone Group LP’s GSO Capital, who he said negotiated the plan privately with management to get majority ownership. Holders have also disputed restructurings this year at Cliffs Natural Resources Inc., Vanguard Natural Resources LLC and Chesapeake Energy Corp. “Larger distressed-debt funds will likely continue to be in the driver’s seat when it comes to the negotiation of plans of arrangement that suit their interests, to the detriment of the often smaller, unsecured creditors,” said Kyle Kashuba, a partner focused on financial insolvency and corporate restructuring in the Calgary office of law firm Norton Rose Fulbright.
