A U.S. bankruptcy judge has awarded junior creditors a 70 percent ownership stake in the post-bankruptcy oil producer Mesquite Energy, handing a defeat to senior lenders who argued they should own the entire business, Reuters reported. Thursday's ruling by Bankruptcy Judge Marvin Isgur in Houston settles an ownership dispute that has lingered since Mesquite's 2020 emergence from chapter 11 by setting a $200 million value for litigation claims pursued by junior creditors and awarding them a majority of the company's equity and a seat on its board. The senior lenders, Fidelity and Apollo Global Management, increased their stake in the business to 30% from 20% on account of the loan they extended to Sanchez at the start of its bankruptcy. Mesquite, then known as Sanchez Energy, filed for bankruptcy in 2019 with $2.3 billion in debt and emerged a year later through a reorganization plan that gave its top lenders 20% of the reorganized equity and set aside the rest for senior and junior creditors to fight over. The unusual arrangement allowed the company to emerge from bankruptcy without first resolving contentious disputes about the validity of the secured creditors' pre-bankruptcy liens on valuable oil and gas assets.
