January 28, 2021 – The Debtor filed a motion to extend the period during which they have an exclusive right to file solicit acceptances in respect of their already filed Plan, through and including April 27, 2021 [Docket No. 367]. Absent the requested relief, the Plan solicitation period is scheduled to expire on February 26, 2021.
The Debtors express optimism that their Plan will be confirmed at a February 22nd Plan confirmation hearing, but clearly there remain real issues to clarify in advance of that date, with the confirmation hearing having already been delayed by almost a month. As noted below, the Debtors' November 25, 2020 Disclosure Statement provided that their Official Committee of Unsecured Creditors (the "Committee") was not yet supportive of the Plan; a position that does not appear to have changed, although the Debtors are now no more specific than noting that they "continue to negotiate with key creditor constituencies in an attempt to resolve outstanding issues related to the Plan."
Whereas one would expect to see language in a requesting motion along the lines of "without the requested extension, the Debtors could face competing plans;" that usually boilerplate statement is made considerably less so by the Debtors' further concession that "expiration of the Exclusive Period would likely lead to adversarial situations…"
The extension motion explains, “The Debtors have made significant progress towards an exit from chapter 11, having obtained approval of the Disclosure Statement, commenced the solicitation of votes on the Plan, and scheduled a hearing on confirmation of the Plan for February 22, 2021. While the Debtors are confident that the Plan will be confirmed at such hearing, the Debtors continue to negotiate with key creditor constituencies in an attempt to resolve outstanding issues related to the Plan and smooth the Debtors’ path to a consensual confirmation. Nevertheless, the Exclusive Period expires on February 26, 2021. In the event the Debtors require more time to negotiate with key stakeholders or are unable to obtain confirmation of the Plan on February 22, 2021, the Debtors request a limited extension of the Exclusive Period, through and including April 27, 2021, to facilitate further negotiations. Without the requested extension, the Debtors could face competing plans, which would only lead to value-destructive litigation rather than the consensus that the Debtors endeavor to obtain.
Moreover, expiration of the Exclusive Period would likely lead to adversarial situations that would cause deterioration in the value of the Debtors’ estates and their ability to confirm a consensual plan."
On November 25, 2020, the Debtors filed their First Amended Plan of Reorganization and a related Disclosure Statement [Docket Nos. 276 and 277, respectively], with the latter approved on December 1st.
Those documents anticipated a January 25, 2021 Plan confirmation hearing (now slipped to February 22nd) but made it clear that there remained significant ground to be covered with the Committee, noting that: "The Official Committee of Unsecured Creditors does not currently support the Plan as proposed [see further below on the Committee's stance]. However, the Committee continues to work constructively and negotiate with the Debtors and other key stakeholders to resolve the Committee's issues with the Plan in advance of the confirmation hearing."
The Disclosure Statement provides as to the Committee's view on the Plan's current distribution to unsecured creditors and third party releases: "The Debtors estimate that General Unsecured Claims (other than Credit Agreement Deficiency Claims) total approximately $12 million and that the cash distribution to Holders of Allowed General Unsecured Claims will total $240,000 in the aggregate. The Committee does not believe the cash distribution to Holders of Allowed General Unsecured Claims is adequate at this time and renders the Plan unconfirmable. However, the Committee continues to work constructively and negotiate with the Debtors and other key stakeholders regarding the cash distribution to Holders of Allowed General Unsecured Claims….
The Committee believes that a litigation trust should be established to reconcile claims, make distributions and pursue claims that may exist against certain parties that are not Holders of Allowed General Unsecured Claims. The Debtors believe that the Reorganized Debtors should be responsible for reconciling claims, making distributions and pursuing claims that may exist against certain parties that are not Holders of Allowed General Unsecured Claims. The Debtors further believe that there may not be sufficient funding available for such a litigation trust. The Debtors, the Committee, and other key stakeholders will continue to negotiate the nature and existence of a post-confirmation litigation trust in advance of the Confirmation Hearing."
The Debtors also stated in the amended Disclosure Statement that the Committee "disputes the extent and scope of the proposed releases set forth in Article IX.C of the Plan. The Debtors reserve the right to challenge the Committee’s contentions regarding such proposed releases. The Debtors, the Committee, and other key stakeholders will continue to negotiate the extent and scope of such proposed releases in advance of the Confirmation Hearing."
About the Debtors
According to the Declaration: “The Debtors are engaged in the business of extracting, processing and marketing metallurgical coal and thermal coal from surface mines. The Debtors’ customers include steel and coke producers, industrial customers and electric utilities. The Debtors have four mines that are currently operational, two of which are located in Jefferson County, Alabama (the Flat Top Mine and the Sloan Mountain 3 Mine). The operational mines in Jefferson County account for 71% of the Debtors’ total revenue and 59% of the total tons of coal produced by the Debtors.
In addition to the four operational mines, the Debtors own or lease sixteen mines that are non-operational — twelve mines at which reclamation is in process and four mines at which the Debtors have never begun mining activities. Those assets are located in Jefferson, Walker, Marion, Winston and Cullman Counties respectively. The Debtors also own or lease two coal washing plants which are currently in use: the North Pratt Washer in Jefferson County; and the Choctaw Washer in Walker County.”
As to corporate history and “the Acquisition,” the Declaration provides: “FM Coal was formed on July 28, 2017. Shortly thereafter, on September 1, 2017, FM Coal acquired (the ‘Acquisition’) from Otis R. ‘Randy’ Robinson and Kendall ‘Kenny’ Robinson (collectively, the ‘Sellers’) the shares and/or membership interests in the other Debtors. As part of the Acquisition, the Sellers also transferred certain equipment to FM Coal, and FM Coal assumed certain liabilities. The Acquisition was funded by new senior secured financing totaling $70 million, which also included the refinancing of certain existing debt, transaction related expenses and FM Coal’s acquisition of additional equipment.”
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