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MURRAY ENERGY: $1.2-Bil. Credit Bid Sale Plan Has 0% for Unsecureds

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Murray Energy Holdings Co., et al., filed a First Amended Joint Plan Pursuant and a corresponding Disclosure Statement on April 6, 2020.

The Debtors’ proposed Plan will allow the Debtors to emerge 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.

A new entity, Mining Purchaser, Inc., was formed by the superpriority agent, at the direction of certain Consenting Superpriority Lenders, constituting “Requisite Lenders” under the Superpriority Credit Agreement, to serve as the Debtors’ “stalking horse bidder” to acquire certain of the Debtors’ assets. 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 consistent with the restructuring term sheet attached to the restructuring support agreement (the “RSA”). The RSA continues to have the support of lenders holding more than 83 percent of the claims under the Superpriority Term Loans (the “Consenting Superpriority 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. 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.

The DIP Facility also rolled-up the Debtors’ prepetition $90 million “first in, last out” facility in exchange for, among other things, the removal of the Debtors’ borrowing base under the Debtors’ Prepetition ABL Facility. A portion of the DIP Facility’s new money proceeds were used to repay the asset-based revolving portion of the Debtors’ Prepetition ABL Facility, which repayment provides the Debtors with additional operational flexibility. The DIP Facility was premised on two important ideas—a structured sale process for substantially all of the Debtors’ assets, and a meaningful reduction of the Debtors’ legacy liabilities. The DIP Facility has played a significant role in the Debtors’ restructuring efforts and has provided substantial working capital allowing the Debtors to fund their operational needs, the cost of these chapter 11 cases, and vendors who had been stretched thin prior to the filing of these cases.

$1.2-Bil. Credit Bid

On December 3, 2019, the Debtors filed their initial chapter 11 plan contemplating the sale of the Debtors’ assets pursuant to a chapter 11 plan, and on Dec. 4, 2019, the Debtors filed a motion seeking approval of the bidding procedures.

The Debtors and their advisors conducted a marketing process, resulting in three formal bids in addition to the Stalking Horse Bid — none of which were for all or substantially all of the Debtors’ assets. After consultation with the Unsecured Creditors COmmittee and the Ad Hoc Group, the Debtors and their advisors determined that none of these bids was a qualified bid and the Stalking Horse Bid presented the only viable path forward for the Debtors and their estates. The Stalking Horse APA provides for the Stalking Horse Bidder to credit bid claims arising under the Superpriority Term Loans in an aggregate amount equal to $1.2 billion to acquire substantially all of the Debtors’ assets free and clear of all liens, claims, interests, charges, and other encumbrances (including the Debtors’ collective bargaining agreements (“CBAs”) and successorship clauses contained therein) under sections 363 and 1123(b)(4) of the Bankruptcy Code.

Legacy Liabilities

The Debtors face significant legacy liabilities, including over $8 billion in actual or potential legacy liabilities under various pension and benefit plans pursuant to statute and the Debtors’ CBAs. As described further herein, since November 2019, the Debtors have engaged in a series of negotiations with the United Mine Workers of America (the “UMWA”) and the Official Committee of Retirees (the “Retiree Committee”) to address the Debtors’ CBAs and retiree obligations. Pursuant to the terms of the DIP Facility and RSA, if such negotiations proved unsuccessful, the Debtors were to file motions seeking relief to modify certain benefit obligations pursuant to sections 1113 and 1114 of the Bankruptcy Code. The Stalking Horse APA is also clear that the Stalking Horse Bidder, as the winning bidder in the marketing process, will not assume any health, retirement, or pension plans arising under the Debtors’ CBAs or statute. The Debtors have not been able to reach agreement with the UMWA and the Retiree Committee regarding a resolution of these issues, and thus the terms of the DIP Facility and Stalking Horse APA require the Debtors to file motions under sections 1113 and/or 1114, as applicable, to seek authority to terminate or otherwise modify the Debtors’ UMWA CBA or their obligations to retirees arising under the UMWA CBA or the Coal Industry Retiree Health Benefit Act of 1992. Notably, on March 30, 2020, the Debtors filed a motion seeking interim modifications pursuant to sections 1113 and 1114 of the Bankruptcy Code to eliminate the Debtors’ obligations to provide retiree medical benefits pursuant to the UMWA CBA.

Plan Contingencies

Although the Debtors believe that the sale transaction proposed in the Plan maximizes the value of their estates, the Debtors and the Plan must address certain material contingencies that would otherwise risk the Debtors’ ability to consummate the Plan, including the following:

In light of the Debtors’ substantial legacy liability costs, the Stalking Horse APA is conditioned on the Debtors’ elimination of such costs from their go-forward business operations. Specifically, the Debtors must obtain an order or orders terminating or modifying (in a manner acceptable to the Stalking Horse Bidder) all of the Debtors’ obligations with respect to retiree or pension benefits or plans, including retiree benefits as defined in Section 1114 of the Bankruptcy Code and any other obligations to contribute to any health, retirement, or pension plan. The Debtors remain engaged with the UMWA and the Retiree Committee on these legacy liabilities, and at this time do not have any such orders. Failure to obtain such orders will result in the Debtors being unable to consummate the sale transaction with the Stalking Horse Bidder or the Plan.

Murray NewCo Financing

The Plan is a significant achievement in the current coal marketplace, but the Plan must be financed. Specifically, Murray NewCo needs substantial cash to operate the Debtors’ operations after consummation of the Plan and the Plan must leave behind cash proceeds to fund the Debtors’ secured, administrative, and priority claims. The Debtors and the Ad Hoc Group are continuing discussions regarding Murray’s go-forward business operations, the Debtors’ claims pool, and the potential funding needed for consummation of the Plan. Once this number is determined, the Debtors and/or Murray NewCo will need to raise sufficient cash to fund emergence. If the Debtors and/or Murray NewCo fail to raise sufficient funding, consummation of the Plan would be at risk.

Black Diamond Litigation

On November 20, 2019, Black Diamond Commercial Finance, L.L.C., as administrative agent for the Debtors’ prepetition term loan lenders, commenced an adversary proceeding (Adv. Pro. No. 19-02143) (the “Black Diamond Adversary”) seeking, among other things, a declaration that “the Term Loan lenders are the true senior and first lien lenders with respect to the Term Loan Collateral.” By this action, Black Diamond asserts that the Debtors must first address the prepetition term loan lenders’ approximately $51 million claims before addressing the Debtors’ Superpriority Term Loans. The Debtors believe that the Superpriority Term Loans are the Debtors’ first priority loans, and the prepetition term loan lenders’ claims sit behind the approximately $1.73 billion in Superpriority Term Loan Claims. If Black Diamond is ultimately successful in their litigation, however, the Debtors and the Superpriority Lenders will need to address the prepetition term loan claims.

Projected Recoveries

Class — Type of Claim — Allowed Claims — % Recovery
————————————————————————————-
4 Superpriority Claims $1,753,616,132 68%
5 Term Loan Claims $51,901,833 0%
6 1.5L Notes Claims $521,922,961 0%
7 Stub 2L Notes Claims $1,983,752 0%
8 2L Notes Claims $312,634,748 0%
9 General Unsecured Claims $16,735,322,727 0%
10 Intercompany Claims $12,968,146,959 0% to 100%
11 Intercompany Interests N/A 0% to 100%
12 Interests in Holdings N/A 0%
13 Section 510(b) Claims N/A 0%

A full-text copy of the Disclosure Statement dated April 6, 2020, is available at https://tinyurl.com/ud5793r from PacerMonitor.com at no charge.

Counsel to the Debtors:

Kim Martin Lewis
Alexandra S. Horwitz
DINSMORE & SHOHL LLP
255 East Fifth Street, Suite 1900
Cincinnati, Ohio 45202
Telephone: (513) 977-8200
Facsimile: (513) 977-8141

– and –

Nicole L. Greenblatt, P.C.
Mark McKane, P.C.
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900

– and –

Ross M. Kwasteniet, P.C.
Joseph M. Graham
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
300 North LaSalle
Chicago, Illinois 60654
Telephone: (312) 862-2000
Facsimile: (312) 862-2200

About Murray Energy

Headquartered in St. Clairsville, Ohio, Murray Energy is the largest privately owned coal company in the United States, producing approximately 76 million tons of high quality bituminous coal each year, and employing nearly 7,000 people in the United States, Colombia and South America.

Murray Energy now operates 15 active mines in five regions in the United States, plus two mines in Colombia, South America. It operates 12 underground longwall mining systems, 42 continuous mining units, 10 transloading facilities, and five mining equipment factory and fabrication facilities.

Murray Energy and its affiliates sought protection under Chapter 11
of the Bankruptcy Code (Bankr. S.D. Ohio Lead Case No. 19-56885) on
Oct. 29, 2019. At the time of the filing, the Debtors disclosed
assets of between $1 billion and $10 billion and liabilities of the
same range.

The cases have been assigned to Judge John E. Hoffman Jr.

The Debtors tapped Kirkland & Ellis LLP and Kirkland & Ellis
International LLP as general bankruptcy counsel; Dinsmore & Shohl
LLP as local counsel; Evercore Group L.L.C. as investment banker;
Alvarez and Marsal L.L.C. as financial advisor; and Prime Clerk LLC
as notice and claims agent.

The U.S. Trustee for Region 9 appointed creditors to serve on the official committee of unsecured creditors on Nov. 7, 2019. The committee tapped Morrison & Foerster LLP as legal counsel; AlixPartners, LLP as financial advisor; and Vorys, Sater, Seymour and Pease LLP as local counsel. Moelis & Company LLC, is the investment banker.

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