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Murray Energy working on deal to resolve claims against execs, Murray family

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Essential Energy Insights - February 2021

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Murray Energy working on deal to resolve claims against execs, Murray family

A group of creditors that had said the founder of coal miner Murray Energy Corp. and his family treated the company like their own "piggy bank" has put its efforts to pursue those claims on hold as they work out the details of a settlement to resolve the concerns.

A committee of unsecured creditors had prepared a complaint including claims of fraudulent transfers and breaches of fiduciary duty against Murray Energy founder Robert Murray and CEO, COO and CFO Robert Moore. During a May 28 status conference before the U.S. Bankruptcy Court for the Southern District of Ohio, an attorney representing the coal company said it is working on settlements with unsecured creditors, Murray family members and other stakeholders that would resolve the claims.

The unsecured creditors had filed a complaint alleging that Murray and Moore were grossly overcompensated compared to other coal executives despite its weak financial position. They also claimed that Murray and his family used corporate assets and funds for personal benefit while the company was allegedly insolvent. Murray Energy is the largest privately held coal company in the U.S.

The new settlements should be finalized early in the week of June 1, Joe Graham, a restructuring partner with Kirkland & Ellis LLP, which is representing Murray Energy, said during the status conference.

"The parties are working diligently to document those settlements into an amended [restructuring] plan, which we hope to file shortly," Graham told the court.

Murray Energy reached an agreement in principle with its superiority lenders and the unsecured creditors that would resolve the unsecured creditors' standing motion and potential objections to the plan, Graham said. The company, the superpriority lenders and the Murray family reached a separate agreement in principle that Graham said he expects will be supported by the unsecured creditors.

The deal will provide recovery to holders of Murray Energy's junior debt and general unsecured creditors, Graham told the court. The plan will also supply the company with new liquidity through a "Murray family settlement" of an unspecified amount to cover emergence costs and reduce the expected costs of litigating contested issues. The court originally scheduled the May 28 status hearing to resolve a discovery dispute related to the deposition of Murray, Moore and various Murray Energy employees. A letter from Murray Energy to the court dated May 25 said the unsecured creditors' committee spent over $1 million separately investigating potential insider claims.

Murray Energy wrote in the letter that it offered to make Moore and Murray Energy Chief Accounting Officer Jeremy Harrison available for deposition but insisted there was "no good cause" to depose Murray, his sons who work at the company, or employees who served as a pilot and procurement director for the company. Murray Energy specified they do not represent Murray, who is separately represented by counsel at Willkie Farr & Gallagher LLP.

A May 27 filing said the unsecured creditors' motion for authority to prosecute claims against Murray, Moore and the other parties was adjourned indefinitely. Todd Goren, an attorney with Morrison & Foerster LLP representing the unsecured creditors, said during the hearing that he is pleased to be talking about a global resolution to the bankruptcy case rather than disputing discovery issues.

"It's been a difficult case, particularly from the perspective of unsecured creditors, made even more difficult by COVID-19 and the disruption to the business that it caused," Goren told the court. "We were able to reach a settlement that enabled the company to get out of bankruptcy without more needless fighting over the plan."

Graham told the court that the settlement would free up time to resolve other issues, including a dispute between the company and a lender that said the company breached its bankruptcy financing agreement by manipulating the total value of reported assets. The company is also facing a dispute with competitor Consol Energy Inc., which as a creditor in the case, is seeking a conversion of the Chapter 11 restructuring case into a Chapter 7 liquidation.