Supreme Court Declines Appeal of Apollo’s Mesquite Energy Win

The US Supreme Court rejected an invitation to wade into a back-and-forth creditor fight over equity in reorganized Texas oil driller Mesquite Energy Inc., cementing a victory for Apollo Global Management.

A US Court of Appeals for the Fifth Circuit decision granting full ownership of Mesquite to Apollo and other senior lenders will remain in place following a high court order Monday turning away petitioning junior creditors who were previously awarded a 70% stake in the company following the bankruptcy of Mesquite predecessor Sanchez Energy Inc.

The dispute in large part stems from the impact of the Covid-19 pandemic on oil and gas prices in early 2020, which rapidly dragged Sanchez’s enterprise value down to about $85 million following its filing for bankruptcy in 2019.

Creditors rushed to confirm a restructuring plan that allowed the company to emerge from Chapter 11 while setting aside questions related to lender liens and equity ownership.

Judge Marvin Isgur of the US Bankruptcy Court for the Southern District of Texas then spent years adjudicating a multi-step litigation intended to determine the split of Mesquite’s equity between a group of senior lenders and a competing group of unsecured noteholders.

Isgur ruled in 2023 that the lenders were entitled to just 30% of the company despite holding secured debt that exceeded the company’s value because those lenders failed to properly fix liens on Sanchez’s assets before the company’s bankruptcy. The outcome was a major boon to the noteholders as Mesquite’s value soared to an estimated $1 billion in the pandemic’s wake.

But the Fifth Circuit overturned the bankruptcy court ruling earlier this year, finding that Isgur had already valued the lender liens in excess of what Sanchez was worth in 2020.

Alternatively, the appeals court said, Isgur erroneously authorized a double recovery against the lenders by failing to account for the fact that they relinquished their pre-bankruptcy liens to the estate.

The unsecured group in August urged the justices to review the case, saying the Fifth Circuit failed to appreciate the fact that the collateral voluntarily returned to Sanchez was worthless at the time.

The unsecured noteholders are represented by Quinn Emanuel Urquhart & Sullivan LLP. The senior lender group is represented by Willkie Farr & Gallagher LLP and Jones Day LLP.

The case is Delaware Trust Co. v. Ad Hoc Group of Senior Secured Noteholders, U.S., No. 25-208, order 11/24/25.