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Murray Energy Holding Co. – Files Revised Plan and Disclosure Statement Reflecting Worsening Conditions; Creditors Holding Over $10bn in Claims Set to Lose Everything

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April 22, 2020 – The Debtors filed a Revised First Amended Plan and a related Disclosure Statement [Docket Nos. 1315 and 1316, respectively] with each attaching a redline showing changes to the version filed on April 6, 2020. The Disclosure Statement also attaches a detailed liquidation analysis.

There is no good news here, as summed up in a new "Financial Difficulties" section (as in difficulties on top of the ones that put the Debtors in Chapter 11 in the first place) and echoed in a paragraph detailing the opposition of the Debtors' Official Committee of Unsecured Creditors (the "Committee"), each of which is detailed below. What it does not make sense to copy into this piece (if only due to length) is a contribution submitted by the Committee which details its view (across 8 pages) of potential investigations against debtor insiders, investigations which it argues may ultimately leave something for unsecured creditors. This latter point being for many the most painful of a painful document, $9.2bn of general unsecured claims (including $5.7bn of pension plan contributions) set to receive $zero. Pain is, however, not reserved for those at the bottom; with everyone up the waterfall until the credit-bidding superpriority lenders also set to receive $zero, including holders of term loan and note claims aggregating almost $1.0bn

Plan Summary

The Debtors’ Revised Disclosure Statement [Docket No. 1316] states, “The proposed Plan will allow the Debtors to be sold as a going concern, ensuring that the Debtors’ assets will continue operating and providing continued employment to thousands of employees. Over the last few months, the Debtors and their advisors have conducted a marketing and sale process for substantially all of the Debtors’ assets, in accordance with the court-approved bidding procedures [Docket No. 742] (the ‘Bidding Procedures’). A new entity, Mining Purchaser, Inc. (together with its designees, the ‘Stalking Horse Bidder’) was formed by the Super-priority Agent, at the direction of certain Consenting Super-priority Lenders, constituting ‘Requisite Lenders’ under the Super-priority Credit Agreement, to serve as the Debtors’ ‘stalking horse bidder’ to acquire certain of the Debtors’ assets (the ‘Stalking Horse Bid’). Mining Parent Holdco, Inc. (‘Murray NewCo’) will be the indirect owner of 100 percent of the equity interests of the Stalking Horse Bidder. The terms of the Stalking Horse Bid are outlined in the Stalking Horse APA filed on March 16, 2020 [Docket No. 1064], and are consistent with the restructuring term sheet attached as an exhibit to the restructuring support agreement, attached hereto as Exhibit C (together with all exhibits thereto, and as may be amended, modified, supplemented, or amended and restated from time to time, the ‘RSA’). The RSA continues to have the support of lenders holding more than 83 percent of the claims under the Super-priority Term Loans (the ‘Consenting Super-priority Lenders’), noteholders holding more than 52 percent of the 1.5L Notes, and noteholders holding more than 62 percent of the 2L Notes. Following a marketing process conducted in accordance with the Bidding Procedures that failed to produce any other viable qualified bids by the bid deadline of March 16, 2020, the Debtors filed a notice cancelling the auction and designating the Stalking Horse Bidder as the winning bidder [Docket No. 1076]. The Plan contemplates the sale of substantially all of the Debtors’ assets to the Stalking Horse Bidder pursuant to the terms of the Stalking Horse APA for a credit bid purchase price of $1.2 billion of the approximately $1.7 billion in outstanding Super-priority Term Loans. Absent any other qualified bids surfacing in the current distressed coal market and in the wake of the COVID-19 pandemic, the Stalking Horse Bid provides the Debtors with the best and only path forward for their estates, which would otherwise face complete liquidation [language in bold is new].

The Plan does not provide for a recovery to holders of the Debtors’ remaining approximately $900 million in junior funded debt or other general unsecured creditors. The Plan does, however, contemplate full recoveries to allowed administrative and priority claims, which may otherwise not be paid outside of the Plan context.”

The following is an updated summary of classes, claims, voting rights, and expected recoveries showing changes (defined terms are as defined in the Plan and/or Disclosure Statement):

  • Class 1 (‘Other Priority Claims’) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $2,362.543 and expected recovery is 100%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 2 (‘Other Secured Claims’) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $19,099.502 and expected recovery is 100%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 3 (‘Secured Tax Claims’) is unimpaired, deemed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $4,717,977 and expected recovery is 100%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 4 (‘Super-priority Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $1,753,616,131.58 and expected recovery is 68%FN. The estimated range of recovery under Chapter 7 is 0-3.6%. The Super-priority Claims shall be deemed allowed in the amount of $1,753,616,131.58 (consisting of $1,593,188,196.27 in B-2 Super-priority Claims and $160,427,935.31 in B-3 Super-priority Claims) as of the Petition Date, plus interest, fees, and other expenses and amounts provided for in the Super-priority Credit Agreement, incurred after such date, through the Effective Date, solely to the extent Allowed by the Bankruptcy Code. Each Holder of an Allowed Super-priority Claim shall receive, up to the full amount of such Holder’s Allowed Super-priority Claim, its Pro Rata share of 100 percent of 

(w) the New Interests, subject to dilution for the Management Incentive Plan; provided, that in the event that such Holder’s Pro Rata share of the New Interests would result in such Holder receiving an amount of New Interests in excess of the Ownership Cap, such Holder shall receive (i) the maximum amount of New Interests permitted to be issued pursuant to the Organizational Documents that would result in such Holder receiving New Interests in an amount up to the Ownership Cap and (ii) a Warrant exercisable into the amount of New Interests in excess of the Ownership Cap that such Holder would otherwise be entitled to receive;

(x) the New Takeback Debt, if any (less any New Takeback Debt issued in exchange for any DIP Term Loan Claims);

(y)Cash proceeds of any of the Debtors’ assets that are not Acquired Assets and that constitute collateral of the Super-priority Claims pursuant to the Super-priority Loan Documents; and

(z) its Pro Rata share (along with Class 5, Class 6, Class 7, Class 8, and Class 9) of Wind-Down Distributable Consideration, if any,

FN: The estimated recovery percentage for the Super-priority Claims is based solely on the Stalking Horse Bidder’s credit bid of $1.2 billion of the Super-priority Claims and is not based on any independent valuation of the recoveries for the Super-priority Claims.

  • Class 5 (‘Term Loan Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $51,901,832.60 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%. The Term Loan Claims shall be deemed Allowed in the amount of $51,901,832.60 (consisting of $38,880,348.11 in B-2 Term Loan Claims and $13,021,484.49 in B-3 Term Loan Claims). Each Holder of an Allowed Term Loan Claim shall receive, up to the full amount of such Holder’s Allowed Term Loan Claim, its Pro Rata share (along with Class 4, Class 6, Class 7, Class 8, and Class 9) of Wind-Down Distributable Consideration, if any,
  • Class 6 (‘1.5L Notes Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $522,835,228.95 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%. Each Holder of an Allowed 1.5L Notes Claim shall receive, up to the full amount of such Holder’s Allowed 1.5L Notes Claim, its Pro Rata share (along with Class 4, Class 5, Class 7, Class 8, and Class 9) of Wind-Down Distributable Consideration, if any.
  • Class 7 (‘Stub 2L Notes Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $1,983,751.89 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%. Each Holder of an Allowed Stub 2L Notes Claim shall receive, up to the full amount of such Holder’s Allowed Stub 2L Notes Claim, its Pro Rata share (along with Class 4, Class 5, Class 6, Class 8, and Class 9) of Wind-Down Distributable Consideration, if any.
  • Class 8 (‘2L Notes Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $312,634,748.43 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%. Each Holder of an Allowed 2L Notes Claim shall receive, up to the full amount of such Holder’s Allowed 2L Notes Claim, its Pro Rata share (along with Class 4, Class 5, Class 6, Class 7, and Class 9) of Wind-Down Distributable Consideration, if any.
  • Class 9 (‘General Unsecured Claims’) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $9,217,077,586.52 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%. Each Holder of an Allowed General Unsecured Claim shall receive, up to the full amount of such Holder’s Allowed General Unsecured Claim, its Pro Rata share (along with Class 4, Class 5, Class 6, Class 7, and Class 8) of Wind-Down Distributable Consideration, if any,

FN: This figure includes approximately $5.7 billion in liability that Murray could face as a result of withdrawing from the UMWA 1974 Pension Plan and Trust (the “1974 Pension Plan”), which has been asserted on a joint-and-several basis against each Debtor. As noted above, the Debtors are continuing to review their claims pool, and such amounts may be significantly less.

  • Class 10 (‘Intercompany Claims’) is impaired, deemed to reject, and not entitled to vote on the Plan. The aggregate amount of claims is $12,968,146,959.08 and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 11 (‘Intercompany Interests’) is impaired, deemed to reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 12 (‘Interests in Holdings’) is impaired, deemed to reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0%. The estimated range of recovery under Chapter 7 is 0%.
  • Class 13 (‘Section 510(b) Claims’) is impaired, deemed to reject, and not entitled to vote on the Plan. The aggregate amount of claims is N/A and expected recovery is 0%. The estimated range of recovery under Chapter 7 is N/A.

The Debtors’ Financial Difficulties

The new disclosure reads: "During the course of these chapter 11 cases, the Debtors’ financial position has been eroded by adverse market conditions, including lower demand for coal driven by a warm winter temperatures as well as a global economic decline caused by the COVID-19 pandemic. These market headwinds have resulted in EBITDA shortfalls of roughly $100 million relative to recent DIP forecasts

Moreover, forecasts indicate that the Debtors’ remaining liquidity (including the DIP Facility) may fall below $50 million by the end of April 2020. The DIP Term Lenders have asserted that the EBITDA shortfalls, among other things, have resulted in defaults under the DIP Credit Agreement, and the Debtors and the DIP Term Lenders are negotiating a forbearance pursuant to which the DIP Term Lenders would temporarily agree to abstain from exercising remedies on account of these alleged defaults. The global COVID-19 pandemic has triggered a variety of secondary effects which further impact the Debtors’ business. Specifically, the Debtors have received force majeure notices from certain customers advising that, due to the unforeseen impacts of COVID-19, the customers can no longer receive and store the full amount of the coal volumes under contract. Thus, recent financial performance may very well get worse. In light of these financial difficulties and in tandem with the forbearance negotiations, the Debtors have taken steps to cut costs and preserve cash, including, among other things, cutting executive salaries, idling their Genesis Mine, and requiring all expenditures over $25,000 to be personally approved by the Debtors’ CEO. These cost-cutting and cash preservation efforts are expected to yield more than $15 million of annual cost savings, which will help extend the liquidity runway and facilitate a path to exit. The Debtors have also sought to cut off various legacy liability costs, as noted above and discussed more fully below, which the Debtors estimate will save approximately $8 million per month. The Debtors will continue implementing proactive cost controls and taking other measures necessary to preserve value for all stakeholders."

Committee Opposition

The Disclosure Statement adds the following paragraph: "The Unsecured Creditors’ Committee opposes the Plan. The Plan provides no distribution to general unsecured creditors and contemplates potential releases—for what the Unsecured Creditors’ Committee believes is no meaningful value—of potential material claims of the Debtors against their controlling shareholders and insiders. The Plan also releases estate claims regarding the extent and validity of the liens asserted by the Debtors’ prepetition secured lenders, even though the Unsecured Creditors’ Committee believes that it has identified flaws in those purported liens. The Unsecured Creditors’ Committee believes that the Plan must provide a distribution to general unsecured creditors in exchange for releasing these claims or, alternatively, that the claims should be contributed to a litigation trust established for the benefit of general unsecured creditors. Accordingly, the Unsecured Creditors’ Committee encourages general unsecured creditors to vote to reject the Plan and “opt out” of the Third-Party Releases."

Exhibits attached to the Disclosure Statement

  • Exhibit A: First Amended Chapter 11 Plan
  • Exhibit B: Corporate Structure Chart
  • Exhibit C: RSA (together with the Restructuring Term Sheet)
  • Exhibit D: Liquidation Analysis

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The post Murray Energy Holding Co. – Files Revised Plan and Disclosure Statement Reflecting Worsening Conditions; Creditors Holding Over $10bn in Claims Set to Lose Everything appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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