Westmoreland Coal Company – Affiliated Debtors Object to Their Own Plan as Unconfirmable, Argue Failure to Address Transition Services Creates Irreparable Harm

January 29, 2019 – Westmoreland Resource Partners, LP (“WMLP”) and certain of its subsidiaries (collectively, the “WMLP Debtors”) objected to the Debtors’ Joint Chapter 11 Plan (“WLB Plan”) [Docket No. 1200] citing concerns that the Plan as drafted will leave it without the means to continue their operations. The corporate structure is complicated, but is necessary to an understanding of this intra-Debtor dispute. Westmoreland Coal Company (“WLB”) is the ultimate parent of all of the other Debtors. Westmoreland Resources GP, LLC (“WMGP”) is a wholly-owned, direct subsidiary of WLB and is the general partner in WMLP, a master limited partnership of which WLB owns approximately 94.4%.  

 

The objection provides detail as to the operational relationship between WLB and the WMLP Debtors, “WMLP Debtors own or lease 14 active surface coal mines….The WMLP Debtors have no employees of their own. Rather, WLB supplies the entire workforce operating the Oxford Mines and the Kemmerer Mine pursuant to the Shared Services Agreement….Under the Shared Services Agreement, in exchange for reimbursement by the WMLP Debtors, WLB (through WMGP) provides all services required to operate and manage the Oxford Mines and the Kemmerer Mine to the WMLP Debtors.”

 

The objection continues, “The WLB Plan is not proposed in good faith because is seriously endangers the WMLP Debtors’ sale process and the WMLP Debtors’ ability to maximize the value of their assets by, among other things, failing to address the need for Transition Services through the consummation of the sales of the WMLP Debtors’ assets and through the orderly conclusion of the WMLP Debtors’ Chapter 11 Cases.

 

Absent an agreement by the WLB Debtors to provide Transition Services, and revisions to the WLB Plan reflecting such agreement, the WLB Debtors’ proposed timeline threatens to seriously disrupt the WMLP Debtors’ operations, asset sales and Chapter 11 Cases which, in turn, would severely impair value for the WMLP Debtors’ creditors and seriously harm the employees who work at the WMLP Mines. As discussed above, all of the employees who work at the WMLP Mines are WLB employees, and WLB provides all of the services required to operate, manage and maintain the WMLP Mines pursuant to the Shared Services Agreement. The WLB Plan as proposed does not contemplate that any Transition Services will be provided by the employees whose work is essential to the continuing operation of the WMLP Mines and to resolving the WMLP Debtors’ Chapter 11 Cases following the closing of the WMLP Debtors’ asset sales. If these employees are terminated, reassigned or relocated upon consummation of the WLB Plan without an agreement for Transition Services – which is anticipated to occur prior to the WMLP Debtors’ contemplated sale closing date for the Kemmerer Assets – the WMLP Mines would not be able to operate, and the WMLP Debtors, their estates and the employees who work at the WMLP Mines could suffer irreparable harm.”