Coal producer Walter Energy on Dec. 9 asked its bankruptcy court for entry of an order authorizing Walter and in-bankruptcy subsidiaries to enter into a global settlement with the official committee of unsecured creditors (UCC), the informal group of certain unaffiliated first lien lenders and first lien noteholders (called collectively the “Steering Committee”) and Coal Acquisition LLC (the “Stalking Horse Purchaser”).
Said the request filed with the U.S. Bankruptcy Court for the Northern District of Alabama: “The Global Settlement is a substantial achievement in the Debtors’ efforts to preserve their businesses as going-concerns and to pave the way to a consensual resolution of these chapter 11 cases. Having negotiated a stalking horse agreement for a value-maximizing sale of substantially all of their Alabama coal operations and other assets to the Stalking Horse Purchaser, the Debtors have now reached an agreement with the UCC and the Steering Committee, which resolves all of the issues among the parties to the Settlement Term Sheet and provides for a recovery to general unsecured creditors.
“Specifically, the Global Settlement and Stalking Horse Agreement contemplate, among other things, (a) the Stalking Horse Purchaser’s assumption of an estimated $115 million to $122 million in liabilities as part of the sale pursuant to the Stalking Horse Agreement, including the Stalking Horse Purchaser’s satisfaction of millions of dollars in cure obligations related to the assumption of the Assumed Contracts, post-petition trade payables and reclamation liabilities and Black Lung liabilities, (b) the Stalking Horse Purchaser’s acquisition and waiver of all causes of action under chapter 5 of the Bankruptcy Code, (c) a distribution of equity in the Stalking Horse Purchaser to the unsecured creditors, together with proportionate participation rights in any exit financing (including any rights offering) on the terms set forth in the Settlement Term Sheet, and (d) an increase in funding for professional fees and expenses incurred by the UCC, above the capped amounts in the Amended Final CCO, and its members in connection with their service on the UCC. In addition, as part of the Global Settlement, the UCC agrees to (a) consent to the Sale Motion, (b) waive its rights and agree not to assert any Claims and Defenses, Challenges or any other claims that it could assert under the Amended Final CCO and (c) not challenge or object to the First Lien Secured Parties’ adequate protection claims and liens, including the relief sought in the Steering Committee’s Motion to Determine the Value of the First Lien Secured Parties’ Adequate Protection Claims as a Result of the Diminution in Value of the First Lien Secured Parties’ Collateral (the “Diminution in Value Motion”).
“The Global Settlement easily satisfies the Bankruptcy Rule 9019 standard and constitutes a sound exercise of the Debtors’ business judgment. In particular, the Global Settlement will conserve the estates’ limited resources by avoiding what would otherwise be a complex and time-consuming litigation among the Parties. It sends the Debtors’ customer, supplier and employee base a reassuring message that the Debtors’ Alabama coal operations remain on track for an emergence from chapter 11 as a going concern. Approving the Global Settlement will allow the Parties to cooperatively and expeditiously pursue the going-concern sale of the Debtors’ businesses, thereby preserving the core operations and maximizing the value of the Debtors’ for stakeholders, and bring these cases to an efficient conclusion.”
The bankruptcy court for Walter Energy on Nov. 25 approved a stalking horse auction process for the company’s U.S. assets, with the stalking horse bidder being a group of Walter Energy creditors.
The Walter Energy companies currently in Chapter 11 protection include: Atlantic Development and Capital LLC; Atlantic Leaseco LLC;Blue Creek Coal Sales; Blue Creek Energy; J.W. Walter Inc.; Jefferson Warrior Railroad; Jim Walter Resources; and Maple Coal Co. LLC.