Patriot Coal and related companies, which sought Chapter 11 protection on May 12, on May 20 asked their bankruptcy court to allow them to retain Alvarez & Marsal North America LLC (A&M) as their Chief Restructuring Officer, with A&M’s Raymond Edward Dombrowski Jr. to perform those specific duties, along with co-workers called the “Engagement Personnel.”
Patriot said in the May 20 filing at the U.S. Bankruptcy Court for the Eastern District of Virginia: “In consideration of the size and complexity of their business, as well as the exigencies of their financial circumstances, the Debtors have determined that the services of experienced restructuring managers will substantially enhance their attempts to maximize the value of their estates. The Engagement Personnel are well qualified to act on the Debtors’ behalf given their extensive knowledge and expertise with respect to chapter 11 proceedings. The Engagement Personnel specialize in interim management, turnaround consulting, operational due diligence, creditor advisory services, and financial and operational restructuring. A&M’s debtor advisory services have included a wide range of activities targeted at stabilizing and improving a company’s financial position, including: (a) developing or validating forecasts and business plans and related assessments of a business’s strategic position; (b) monitoring and managing cash, cash flow, and supplier relationships; (c) assessing and recommending cost reduction strategies; and (d) designing and negotiating financial restructuring packages.
“The Debtors propose to designate Raymond Edward Dombrowski, Jr. as their CRO, nunc pro tunc to the Petition Date. Mr. Dombrowski brings over 20 years of expertise across a wide range of industries, including energy, telecom, financial services, transportation, real estate, and entertainment. His clients have included: SIRVA, SLI, Allegheny Energy, VecTour, APW, Verestar, Great Basin Gold, Oxford Resources, and Marchon Eyeware, as well as the Unsecured Creditors Committee of Kodak. He served as CRO of Chemtura, a $3 billion specialty chemical company. He recently served as CRO of Mepco, LLC, a coal mining and production company affiliated with Longview Power, LLC.
“In addition, A&M and the CRO are intimately familiar with the Debtors’ businesses, financial affairs, and capital structure. Since A&M’s initial engagement by the Company on March 31, 2015, the Engagement Personnel have worked closely with the Debtors’ management and other professionals in assisting with the myriad requirements of these chapter 11 cases. Consequently, the Debtors believe that A&M has developed significant relevant experience and expertise regarding the Debtors, their operations, and the unique circumstances of these chapter 11 cases. For these reasons, A&M is both well qualified and uniquely suited to deal effectively and efficiently with matters that may arise in the context of these chapter 11 cases. Accordingly, the Debtors submit that the retention of A&M and the designation of Mr. Dombrowski as CRO on the terms and conditions set forth herein is necessary and appropriate, is in the best interests of the Debtors’ estates, creditors, and all other parties in interest, and should be granted in all respects.”
Among other things, the Engagement Personnel will support the debtors with respect to:
- performing a financial review of Patriot and its companies, including but not limited to a review and assessment of financial information that has been, and that will be, provided by the Company to its creditors, including without limitation its short and long-term projected cash flows and operating performance;
- identifying (and implementing) cost reduction and operations improvement opportunities;
- assisting the CEO and other Patriot-engaged professionals in developing for the Board of Director’s review possible restructuring plans or strategic alternatives for maximizing the enterprise value of the company’s various business lines;
- serving as the principal contact with the company’s creditors with respect to the company’s financial and operational matters;
- assisting in discussions with, and providing information to, potential investors, secured lenders, official committees, the Office of the United States Trustee for the Eastern District of Virginia;
- assisting the Patriot companies and their other advisors in developing restructuring plans or strategic alternatives for maximizing the enterprise value of their various business lines; and
- performing such other services as requested or directed by the Board or other Patriot personnel, as authorized by the Board and agreed to by A&M, that is not duplicative of work others are performing for the company.
Patriot Coal, which underwent one round of Chapter 11 bankruptcy reorganization earlier this decade, announced May 12 that it is engaged in active negotiations for the sale of substantially all of the company’s operating assets to a strategic partner. The company is also engaged in ongoing discussions with key stakeholders as it evaluates a range of strategic alternatives to maximize the value of its assets. In conjunction with these activities, Patriot and its wholly-owned subsidiaries on May 12 filed the voluntary petitions for restructuring under Chapter 11.
Patriot said it expects its customer shipments and mining operations to continue in the ordinary course during the restructuring process. The company has received a commitment for $100 million in debtor in possession (DIP) financing led by a consortium of the company’s secured debt holders to support its continued operations. Upon approval by the court, the DIP financing, combined with cash generated from ongoing operations, will provide enough liquidity to support the business during the restructuring process.
Bob Bennett, President and Chief Executive Officer of Patriot, said: “In light of the challenging market conditions, and after a comprehensive review of our alternatives, the Board and management team have determined that this process represents the best path forward for Patriot and its stakeholders. Patriot is dedicated to operational and environmental excellence and, as always, we remain committed to operating safely and serving our customers throughout this restructuring process. We greatly appreciate the continued support of our customers and our suppliers and the ongoing hard work of our employees.”
Patriot Coal, now based in West Virginia after moving from an initial corporate headquarters in St. Louis, is a producer and marketer of coal in the eastern United States, with eight active mining complexes in Northern and Central Appalachia. It has shut down operations in western Kentucky.