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Unsecured creditor demands stay in Alpha Natural reorganization over advisor

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Essential Energy Insights - February 2021

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Unsecured creditor demands stay in Alpha Natural reorganization over advisor

Anunsecured creditor is demanding a bankruptcy court stay the reorganization planof Alpha Natural ResourcesInc. over language that would release McKinsey Recovery andTransformation Services U.S. LLC from any guilt or wrongdoing with regards tothe proceedings.

Mar-BowValue Partners, an unsecured creditor with a claim of $1.25 million againstAlpha, filed the motion in the U.S. Bankruptcy Court in the Eastern District ofVirginia on July 15. It asks for a stay pending appeal due to the allegedfailure of McKinsey RTS to disclose its relations with major stakeholders andcompetitors involved in the case. McKinsey RTS is a division of McKinsey &Co. Inc.

McKinseyand Mar-Bow have been battling over these alleged transparency issues throughlitigation. A court ordered McKinsey to offer limited disclosure about itsconnections and regarding entities that may be impacted in the case at the endof June.

ButMar-Bow says in the recent document that the company failed to discloseimportant links to clients that are major stakeholders of Alpha or that aremajor competitors, and filed a motion to compel McKinsey RTS to disclose theseclients.

In particular, Mar-Bow claims that the reorganization plancontains inappropriate exculpation and release provisions that McKinsey RTS maybenefit from due to possible connections that have not been disclosed in courtdocuments.

The court overruled these objections, but in the recentdemand for stay pending appeal, Mar-Bow says that such releases andexculpations should be "granted cautiously and infrequently."

"There are no factual findings here that would supportthe legal conclusion that McKinsey RTS is entitled to the relief in question —especially given that issues concerning their Rule 2014 disclosures arecontinuing," the recent document says.

"When weighing the harm that will occur to Mar-Bowversus the harm to the debtors, the harm to Mar-Bow is significantly greater,and permanent. Moreover, the estate will not be substantially impacted giventhat the plan and sale can be effectuated whether or not McKinsey RTS isreleased or is provided an exculpation."

McKinsey did not respond to a request for comment in timefor publication, but the company has questioned the motivations of Mar-Bow inprevious litigation, saying that Mar-Bow has links to , which wanted to pushMcKinsey RTS out of the bankruptcy advisory business for competitive reasons.