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Murray Energy Holding Co. – Privately Held Coal Giant Files Chapter 11; Announces RSA with, and $350mn DIP Financing to be Provided by, Prepetion Lenders; Founder Robert Murray to Step Down as President and CEO

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October 29, 2019 − Privately held Murray Energy Holding Co. and almost 100 affiliated Debtors (“Murray Energy” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Ohio, lead case number 19-56885. The Debtors, the largest privately owned coal company in the United States, are represented by Kim Martin Lewis of Dinsmore & Shohl LLP. Further board-authorized engagements include (i) Kirkland & Ellis as general bankruptcy counsel, (ii) Evercore Group L.L.C. (“Evercore”) as investment banker, (iii) Alvarez and Marsal L.L.C. (“A&M”) as financial advisor and (iv) Prime Clerk as claims agent.

The Debtors are 100% owned though affiliates controlled by Robert E. Murray, the Debtors' founder and Chairman. Until the Debtors' Chapter 11 filing today, he was also the Debtors' President, and Chief Executive Officer, posts that have now been handed to Robert D. Moore, a former CFO and COO at the Debtors and more recently the Chairman, President and CEO of Foresight Energy ("Foresight," a publicly traded coal company 80% owned by the Debtors). Publicly traded Foresight (2018 10-K) is a useful comparable for the privately traded Debtors; in 2018 generating $1.1bn in revenues on 23.4 million tons of coal. This against the Debtors' ballpark figure of 76 million tons per year. Additionally, Foresight has been required to furnish the SEC with detail as to their own financial struggles, including as to senior debt defaults (and forbearances) that closely track those of the Debtors that control them. We track Foresight separately, here.

The Debtors’ lead petition notes between 25,000 and 50,000 creditors; estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn. Documents filed with the Court list the Debtors’ five largest unsecured creditors as (i) Joy Global ($31.4mn trade debt), (ii) Jenmar Corporation ($27.7mn trade debt), (iii) CB Mining ($11.9mn trade debt), (iv) Jeffrey C Hurt ($10.mn trade debt) and (v) GMS Mine Repair ($9.4mn trade debt). In a list of top 50 unsecured creditors that will be felt deeply in the coal mining community, the Debtors list 48 trade creditors with more than $1.0mn in claims.

In a press release announcing the filing, the Debtors advised that “Murray Energy and certain of its subsidiaries entered into a Restructuring Support Agreement (the 'RSA”' with an ad hoc lender group (the 'Ad Hoc Lender Group') holding more than 60% of the approximately $1.7 billion in claims under the Company’s Superpriority Credit and Guaranty Agreement."

The announcement continues, "In connection with the RSA and DIP Facility, as of today’s petition date, Mr. Robert D. Moore has been named President and CEO of Murray Energy and Murray Energy Corporation."

Company founder Mr. Robert E. Murray added, “Although a bankruptcy filing is not an easy decision, it became necessary to access liquidity and best position Murray Energy and its affiliates for the future of our employees and customers and our long term success.”

Missed October Interest Payments and Forbearance Relief

The present announcements arrive just after relief from potential credit facility defaults terminated on October 28th. In an October 16th press release, the Debtors noted: "As previously disclosed, on October 2, 2019 Murray Energy Corporation ('Murray Energy' or “the Company') entered into forbearance agreements with lenders holding in excess of 50% of outstanding loans under its Superpriority Credit and Guaranty Agreement and with lenders holding in excess of 50% of outstanding loans under its ABL and FILO credit facilities. Under the terms of the forbearance agreements, the lenders agreed to forbear from exercising any and all remedies available to them in respect of any event of default arising from the missed amortization and interest payments due on September 30, 2019. 

On October 15, 2019, Murray Energy and its lenders amended the previously disclosed forbearance agreements, extending the forbearance period through 11:59 p.m. (New York time) on October 28, 2019, unless further extended. The forbearance agreements will terminate upon the earlier of the end of the forbearance period or the occurrence of a specified forbearance termination event.

With discussions with its lenders and noteholders regarding strategic options to strengthen the Company’s business, liquidity and capital structure ongoing, the Company elected not to make the cash interest payments due on October 15, 2019 to holders of the Company’s 12.00% Senior Secured Notes due 2024 and 11.25% Senior Secured Notes due 2021."

DIP Financing Overview  (see "Key Terms of DIP Financing" below for further detail)

The Debtors have announced their intention to finance operations throughout their Chapter 11 with cash on hand and access to a $350.0mn new money debtor-in-possession ("DIP") financing facility (the “DIP Facility”). Lenders party to the RSA have committed to provide the full amount of the DIP Facility, and other Lenders under the Company’s Superpriority Credit and Guaranty Agreement will be given the opportunity to provide funding under the DIP Facility. The proceeds of the DIP Facility will be used to refinance borrowings under the Company’s existing ABL credit facility and to support ordinary course operations and payments to employees and suppliers throughout the restructuring process.

Restructuring Support Agreement ("RSA")

Under the RSA (see link below), the Ad Hoc Lender Group has agreed to form a new entity (“Murray NewCo”) to serve as a stalking horse bidder to acquire substantially all of the Company’s assets by credit bidding its debt under a Chapter 11 plan, subject to an overbid process. The RSA contemplates that substantially all of the Company’s prepetition funded debt will be eliminated. The RSA further contemplates that Mr. Robert E. Murray will be named Chairman of the Board of Murray NewCo and Mr. Robert D. Moore will be President and CEO of Murray NewCo. The Company has agreed to comply with certain milestones related to implementing its Chapter 11 plan and related sale process under the DIP Facility and RSA. 

Key Terms of DIP Financing 

The DIP financing is to be comprised of a $350.0mn DIP term loan facility (the “DIP Term Facility,” with $200.0mn available upon issuance of an interim DIP financing order) to be funded by the members of the Ad Hoc Group that choose to participate (the “DIP Term Lenders”). Upon entry of an interim DIP financing order (i) the Debtors’ prepetition first in, last out (“FILO,” $90.0mn outstanding) claims will convert into a new DIP FILO facility (the “DIP FILO Facility,” and together with the DIP Term Facility, the “DIP Facility”) and (ii) the Debtors’ prepetition ABL claims ($60.7mn) will be repaid in full with the cash proceeds of the DIP Term Facility. The approved budget for the DIP Facility will provide for up to $162.5 million in funding for payment of certain prepetition claims to providers of goods and services necessary to the Company’s ongoing operations and mine safety who agree to postpetition terms acceptable to the Company and the Requisite Consenting Superpriority Lenders.

DIP Term Loan Facility 

  • Borrower: Murray Energy Corporation (the “Borrower”)
  • Guarantors: Murray Energy Holdings Company (“Holdings”): All other direct and indirect domestic subsidiaries of the Borrower that are guarantors under the prepetition Superpriority Credit and Guaranty Agreement (the “Superpriority Credit Agreement”), each as a debtor and debtor-in-possession, and each other existing and future domestic direct or indirect subsidiary of the Borrower (including, for the avoidance of doubt, Murray Metallurgical Coal Properties, LLC and Murray Metallurgical Coal Properties II, LLC (each, a “Mission Holdco”)) other than (i) Foresight GP, Foresight LP and their respective subsidiaries and (ii) the subsidiaries of any Mission Holdco (collectively, the “Guarantors” and, together with the Borrower, the “Debtors”).
  • DIP Lenders: To include participating lenders under the Superpriority Credit Agreement (the “DIP Lenders”): Each Prepetition Superpriority Lender will be given the opportunity to provide a ratable portion of the DIP Term Facility offered in syndication.
  • Backstop Parties: Certain lenders under the Superpriority Credit Agreement that will backstop the full amount of the DIP Term Facility (the “Backstop Parties”).
  • Commitment Amount: $350.0mn to be provided by the DIP Lenders and fully backstopped by the Backstop Parties
  • Facility Structure: Term Loan with $200,000,000.00 funded upon entry of the Interim DIP Term Order and an additional $150,000,000.00 funded in one draw upon entry of the Final DIP order (the “DIP Term Facility”). Funding of the DIP Term Facility to be structured such that DIP Term Facility proceeds shall not constitute ABL collateral or additional ABL collateral, including by means of segregation of DIP Term Facility proceeds.
  • Maturity: Earliest of (a) the date that is nine (9) months following the Petition Date, (b) the effective date of the Acceptable Plan of Reorganization or any other Reorganization Plan, (c) the consummation of a sale or other disposition of all or substantially all assets of the Debtors under section 363 of the Bankruptcy Code, and (d) the date of acceleration or termination of the DIP Term Facility in accordance with its terms
  • Interest Rate: LIBOR + 11.00% cash interest paid monthly
  • Fees: 
    • Put Premium: 5.00%, paid in cash upon entry of the Interim DIP Term Order
    • Upfront Fee: 3.00%, paid in cash upon entry of the Interim DIP Term Order 
    • Exit Fee: 1.00%, paid in cash upon repayment of the DIP Term Facility 
    • Agent Fee: $75,000
  • Use of Proceeds and Budgets: The use of proceeds of the DIP Term Facility shall be subject to budgets agreed upon between the Debtors and the DIP Term Lenders, including the DIP ABL Refinancing Portion to refinance certain prepetition ABL obligations
  • Existing ABL/FILO Facility Treatment: Certain outstanding amounts under the Prepetition ABL Loan Documents to be refinanced by a portion of the DIP Term Facilty proceeds (the “DIP ABL Refinancing Portion”). A portion of the DIP Term Facility equal to $65 million (the “Senior ABL Lien Amount”) shall be senior to the DIP FILO Facility with respect to the ABL collateral and proceeds therefrom.
  • Milestones:
    • Petition Date + 1 calendar day: Deadline to file motion seeking relief of the Interim DIP Term Order Petition Date + 5 calendar days: Deadline for entry of Interim DIP Term Order
    • Petition Date + 35 calendar days: Deadline to file (x) Plan, Disclosure Statement, and Disclosure Statement Motion or (y) a Bidding Procedures Motion that contemplates the sale of all or substantially all of the assets of the Debtors, which sale shall be backstopped by a bid from the Superpriority Lenders (which bid may be in the form of a plan of reorganization) that contemplates, among other things, cash payment of administrative expenses and wind-down costs set forth in a wind down budget acceptable to the Superpriority Lenders in their sole discretion
    • Petition Date + 35 calendar days: Deadline to file KEIP Motion
    • Petition Date + 40 calendar days: Deadline for the Borrower to make proposal for collective bargaining agreement and retiree benefit modifications
    • Petition Date + 45 calendar days: Deadline for entry of Final DIP Term Order

DIP FILO 

  • Borrower: Murray Energy Corporation (the “Borrower”)
  • Guarantors: Murray Energy Holdings Company (“Holdings”). With respect to the DIP FILO Loans (as defined below), all direct and indirect domestic subsidiaries of the Borrower that are guarantors under the prepetition Amended and Restated Revolving Credit Agreement (the “ABL Credit Agreement”), each as a debtor and debtor-in-possession (the “DIP FILO Guarantors”) With respect to the DIP Term Loans (as defined below), all direct and indirect domestic subsidiaries of the Borrower that are guarantors under the prepetition Superpriority Credit and Guaranty Agreement (the “Superpriority Credit Agreement”), each as a debtor and debtor-in-possession, and each other existing and future domestic direct or indirect subsidiary of the Borrower (including, for the avoidance of doubt, Murray Metallurgical Coal Properties, LLC and Murray Metallurgical Coal Properties II, LLC (each, a “Mission Holdco”) and, excluding, (i) Foresight GP, Foresight LP and their respective subsidiaries and (ii) the subsidiaries of any Mission Holdco) (collectively, the “DIP Term Guarantors” and, together with the Borrower and the DIP FILO Guarantors, the “Debtors”)
  • Facility Size: $350,000,000.00 of new money term loans (the “DIP Term Loans”) to be provided by the DIP Term Lenders and fully backstopped by the Backstop Parties. $90,000,000.00 of rolled up prepetition Last-Out Loans (under and as defined in the ABL Credit Agreement), equal to the total amount of the outstanding Last-Out Loans, provided by the DIP FILO Lender (the “DIP FILO Loans”).
  • DIP FILO Lender: GACP Finance Co., LLC
  • Facility Structure: DIP Term Loan with $200,000,000.00 funded upon entry of the Interim DIP Term Order and an additional $150,000,000.00 funded in one draw upon entry of the Final DIP Term Order. DIP FILO Lender to agree that proceeds of DIP Term Loans shall not constitute ABL Collateral or additional ABL Collateral. Entry into the DIP FILO Loans to be effective upon entry of the Interim DIP Term Order, subject to customary challenge rights prior to entry of the Final DIP Term Order.
  • DIP FILO Loans Interest Rate: On amounts not rolled up: L + 9.75% On amounts rolled up: L + 9.50%.
  • ABL Refinancing: Outstanding prepetition non-FILO ABL obligations under the ABL Credit Agreement to be refinanced by a portion of the DIP Term Facility proceeds

Additional Engagements

The Ad Hoc Lender Group has engaged Davis Polk & Wardwell LLP as legal counsel and Houlihan Lokey Capital, Inc. as investment banker.

About the Debtors

Murray Energy Corporation is the largest privately owned coal company in the United States, producing approximately seventy-six million tons of high quality bituminous coal each year, and employing nearly 7,000 people in six states, and Colombia, South America.

Murray Energy now operates fifteen active mines in five regions in the United States, plus two mines in Colombia, South America.  Murray Energy operates twelve underground longwall mining systems and forty-two continuous mining units.  We operate ten transloading facilities, and five mining equipment factory and fabrication facilities.

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The post Murray Energy Holding Co. – Privately Held Coal Giant Files Chapter 11; Announces RSA with, and $350mn DIP Financing to be Provided by, Prepetion Lenders; Founder Robert Murray to Step Down as President and CEO appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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