An ad hoc group of superpriority lenders denounced objections from a coal miner union and Consol Energy Inc. in Murray Energy Corp.'s bankruptcy case, saying the two entities are seeking to second-guess the debtors.
Murray Energy and certain of its affiliates filed for bankruptcy protection in October and have since submitted a bankruptcy reorganization plan that involves the formation of a stalking horse bidder, a sale of substantially all of its assets and a proposal to wind down the estate.
Consol described itself as a "major creditor" in a recent objection to the debtors' bankruptcy proceedings, saying that certain aspects of the financing motion, the debtor-in-possession credit agreement and final orders may "reduce recoveries" for creditors.
The United Mine Workers of America, or UMWA, is preparing to renegotiate its collective bargaining agreement, or CBA, with Murray Energy. A union spokesperson said in a recent interview that roughly one in five of its members works for Murray Energy, and a significant number of its retirees rely on the company for healthcare.
In its objection, the union wrote that the debtors were seeking to "undermine and circumvent" the mandatory bargaining process by asking the court to approve predetermined bargaining outcomes. Doing so contradicts Congress' intent and the court's requirement to "make an independent judgment as to the necessity of any proposed modification or rejection of the CBA or retirement benefits," according to court documents.
The union further alleged that Murray Energy's proposed timeline for the CBA process was "unworkably truncated." It requested that the court deny the debtors' motion, in part because of "an unreasonably short timetable that benefits no one in these proceedings except the third-party lenders."
The debtors turned to an ad hoc group of superpriority lenders to negotiate their financial and restructuring needs. Before filing for bankruptcy protection, the lenders and other parties entered into a restructuring support agreement that paved the way for $350 million in new money debtor-in-possession financing to fund the proceedings.
In its Dec. 9 filing, the superpriority lenders wrote that the debtor-in-possession, or DIP, facility is "an essential component" of Murray Energy's reorganization and that the two objections were made for "narrow, parochial reasons." Should the court grant those objections, the reorganization would likely be thrown into disarray and threaten the debtors' ability to meet the needs of its customers, employees and other stakeholders, the lenders said.
"Neither the UMWA nor CONSOL has argued that the debtors could reorganize without the DIP facility, or that there is any alternative financing available," the lenders said. "Moreover, neither the UMWA nor CONSOL has submitted any evidence that suggests that the debtors' entry into the DIP facility does not reflect the debtors' prudent business judgment."
They also countered that other courts have approved similar milestones for the process "under less trying circumstances" in recent coal bankruptcies. For example, Murray Energy's proposal would give the company 106 calendar days to reach an agreement on the CBAs and retiree benefits, compared with 65 days in Mission Coal Co. LLC's bankruptcy, 30 days in Westmoreland Coal Co.'s and 81 days in Patriot Coal Corp.'s second proceeding, according to the filing.
"The milestones are essential to the transaction — the DIP lenders, like any lenders, would not have agreed to provide hundreds of millions of dollars of new money postpetition financing in the absence of meaningful guideposts to ensure (to the extent possible) an efficient, timely reorganization," the lenders said. "The milestones are designed to strike an appropriate balance between affording sufficient time for a restructuring and/or sale and ensuring that the company does not languish in bankruptcy and incur unnecessary professional fees."