Coal producer Alpha Natural Resources argued in a May 25 brief filed at its bankruptcy court that its latest reorganization plan and accompanying disclosure statement are approvable despite lingering objections by parties that it has has not been able to work out settlements with.
Said Alpha: “Among other things, the terms of the the Second Amended Plan incorporate settlements among the Debtors and many of the most significant stakeholders in these chapter 11 cases, including a global settlement of Plan-related issues (the “Global Settlement”) among (a) the DIP Lenders, (b) the DIP Agents, (c) the First Lien Lenders, (d) the First Lien Agent, (e) the Creditors’ Committee, (f) the Second Lien Notes Trustee, (g) the Ad Hoc Committee of Second Lien Noteholders and its members and (h) the Massey Convertible Notes Trustee. Comprehensive descriptions of the Global Settlement and all other settlements already entered into by the Debtors are provided in the Second Amended Disclosure Statement and, where applicable, have been incorporated into the Second Amended Plan.
“The Debtors are nearing completion of other agreements in support of their restructuring and the Second Amended Plan, although some important matters remain to be resolved. For example, the Debtors continue to work to finalize the Resolution of Reclamation Obligations. The Debtors’ Plan is expressly contingent on their entry into settlements with the state and federal regulators regarding the Reorganized Debtors’ satisfaction of their obligations for environmental reclamation following the Effective Date in the states where they will operate.
“The Debtors have been working diligently with representatives of the applicable state and federal agencies to achieve these settlements and are optimistic that the Resolution of Reclamation Obligations can be achieved as contemplated by the Second Amended Plan.
“It is common in complex chapter 11 cases that solicitation of a debtor’s plan cannot await the finalization of every remaining necessary settlement. Time is of the essence in these chapter 11 cases. Given the challenging conditions in the coal industry and the Debtors’ deteriorating cash position, it is imperative that the Debtors continue to move these cases forward toward confirmation of the Plan and consummation of the NewCo Asset Sale if the Debtors are to successfully emerge from chapter 11. Notably, even the West Virginia Department of Environmental Protection (the “WVDEP”) recognizes this fact in its statement in support of approval of the Disclosure Statement.”
The Alpha companies first filed the Disclosure Statement on March 7. Then they filed the Global Settlement Term Sheet and the Second Lien Noteholder Settlement Stipulation on May 14, and also filed the Amended Plan reflecting such terms on the same date.
The U.S. Trustee argues that the releases in the plan are unjustified to the extent that the Alpha companies are essentially liquidating. “Although, once again, this argument is a Plan Objection, the Debtors note that the Plan manifestly calls for a reorganization and not a liquidation, as reflected in the Financial Projections demonstrating that the Reorganized Debtors are expected to continue operating for the foreseeable future, through the end of 2020 and beyond,” said Alpha.
Alpha on May 20 filed with the court financial projections for the two entities that it wants to be split into. The Newco assets would be sold to creditors and become a new coal company. Alpha would retain other assets, reorganize, and emerge from bankruptcy.
The retained complexes, and the active mines associated with them, are (additional inactive mines are associated with each complex, but are not mentioned):
- Kingston Complex – Glen Alum and Douglas
- Delbarton Complex – Kielty Mine
- Litwar Complex – Horse Creek #1 and Lower War Eagle
- Kepler Complex – Wyoming #2 and Guyandotte Energy
- Marfork Complex – Pax Surface Mine, Pax High Wall Mine, Workman Creek Surface, Workman Creek High Wall Mine, Horse Creek Eagle Mine, Ellis Eagle Mine, Slip Ridge Mine and Allen Powellton
- Inman Admiral Complex – Black Castle Surface, High Wall Mine #1 and High Wall Mine #2
- Mammoth Complex – Empire Surface Mine, Republic Surface Mine, Republic High Wall Mine, Slabcamp Stockton Mine
- Bandmill Complex – Hernshaw Mine, Cedar Grove No. 2. Highlands Surface Mine, Highlands High Wall Mine and Alma Mine
- Sidney Complex – Process Energy
- Roxana Complex – EMC #9
- Elk Run Complex – No active mines
- Erbacon Complex – No active mines
- Goals Complex – No active mines
- Rockspring Complex – No active mines
Then there is an entity called “Newco,” which would potentially be bought by Alpha creditors under a “stalking horse” asset purchase agreement and would include the company’s largest mines, including the Belle Ayr and Eagle Buttle surface mines in the Powder River Basin of Wyoming. NewCo will acquire a total of five mining complexes (additional inactive mines are associated with select complexes, but are not disclosed):
- Cumberland Complex (two longwall mines in the Pittsburgh coal seam in southwest Pennsylvania) – Cumberland Mine and Emerald Mine
- Alpha Coal West Complex – Belle Ayr Mine and Eagle Butte Mine
- Nicholas Complex – Jerry Fork Eagle
- Toms Creek Complex – Cabin Ridge Surface Mine, Cabin Ridge High Wall Mine, Deep Mine #26 and 88 Strip Mine
- McClure Complex – 88 Strip HWM and Deep Mine #41