trending Market Intelligence /marketintelligence/en/news-insights/trending/L6Mf0MQosb5PMGbWVkMKiQ2 content esgSubNav
In This List

Bankruptcy court confirms Cloud Peak's reorganization plan 7 months after filing


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024


IR in Focus | Episode 10: Capital Markets Outlook


Infographic: The Big Picture 2024 – Energy Transition Outlook

Bankruptcy court confirms Cloud Peak's reorganization plan 7 months after filing

A federal bankruptcy court approved Cloud Peak Energy Inc.'s disclosure statement and confirmed its bankruptcy reorganization plan nearly seven months after the Powder River Basin producer filed for bankruptcy protection.

U.S. Bankruptcy Judge Kevin Gross approved the company's plan in a Dec. 5 filing with the U.S. Bankruptcy Court for the District of Delaware. The court had previously approved the sale of Cloud Peak's mines to the Navajo Transitional Energy Co. LLC making the latter one of the nation's largest coal producers by volume.

However, the bonding for those mines is uncertain after the Navajo Nation announced the termination of general indemnity agreements related to the company's Navajo mine when NTEC wanted to expand those agreements to the former Cloud Peak mines. Since then, NTEC has said it is confident in its ability to secure backing for the operation.

Cloud Peak had urged claim holders to support its reorganization plan, warning that failure to do so could result in the company liquidating. The U.S. Securities and Exchange Commission recently objected to the plan, fearing that it would violate federal bankruptcy law by releasing the liability of nondebtor third parties.

The court overruled all objections to the plan with its confirmation. According to the order, the plan received the approval of about 94.4% of class 3 claim holders by number who voted and nearly 99.8% of claim holders by dollar amount. Among class 4 claim holders, about 89.8% of claim holders by number and nearly 95.8% by dollar amount accepted the plan.

The reorganized debtors and the holders of the new parent equity will become parties to the binding new shareholders agreement, according to the document.

This year brought on several major changes in the Powder River Basin. In addition to Cloud Peak's bankruptcy proceedings, Blackjewel LLC also filed for bankruptcy protection and received court approval to sell its western coal mines to an affiliate of FM Coal LLC. And Peabody Energy Corp. and Arch Coal Inc. proposed a joint venture earlier in 2019 to merge their Powder River Basin and Colorado coal assets. That proposal is still undergoing regulatory scrutiny.

Bob LeResche, a Powder River Basin Resource Council board member, said the conservation organization will continue working to ensure public interests are protected regardless of which entity owns the coal mines.

"A significant part of Cloud Peak's bankruptcy plan was NTEC taking on the tax and royalty debt owed to local, state, and federal governments. NTEC says they'll make good on more than $90 million of Cloud Peak's unpaid taxes, but no one knows if they have the funds to do that, and additional tax payments will only continue to eat into the already thin profit margins of these Powder River Basin mines. NTEC could go down the tubes like Blackjewel, and state regulators need to make sure taxpayers don't get left holding the bag," LeResche said in a release.