trending Market Intelligence /marketintelligence/en/news-insights/trending/PwD_0hS3o3KwV7-o3mvV5A2 content esgSubNav
In This List

Feds challenge Alpha Natural's coal asset sale plan, citing lack of clarity


Despite turmoil, project finance remains keen on offshore wind

Case Study

An Energy Company Assesses Datacenter Demand for Renewable Energy


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024

Feds challenge Alpha Natural's coal asset sale plan, citing lack of clarity

Thefederal government is challenging the proposed restructuring plan andasset sale ofAlpha Natural Resources Inc.,arguing that the plan had not included the possibility of a liquidation of thecompany in its disclosure statement with the U.S. bankruptcy court.

Inthe May 10 filing, the government argues that Alpha's disclosure with the U.S.Bankruptcy Court for the Eastern District of Virginia lacks adequateinformation regarding the possibility — and likelihood — of a completeliquidation of the company.

"Althoughthis case was originally represented to the court and the creditors as areorganization, the proposed plan makes clear that the end-game here is more inthe nature of (if not a complete) liquidation," the U.S. trustee for thecase wrote.

Accordingto the government, the company's current plan includes an appeal for permissionto sell its core, non-core and natural gas assets.

Thegovernment argues that Alpha's restructuring plan, according to its owndisclosure form, does not provide sufficient clarity about the role and purposeof its assets following a potential sale.

"Thereis no information about what business these going concerns will conduct, whatincome or profit (if any) Alpha expects to generate (and the basis for suchprojections) or any other information that would allow a creditor to determinewhether the proposed plan constitutes the best course of action or whether itis likely to provide the best recovery for such creditors," the governmentwrote, adding that if the company intends "to conduct no business otherthan to comply with its statutorily required clean-up and reclamationobligations, and will be essentially winding down Alpha's business, then thedisclosure statement needs to fully, clearly and openly disclose that."

The government's objection also argues that the disclosurestatement lacks necessary financial projections of the reorganized company.

Further, the government expressed concern about what itsuggests is an unfair authority of the company's first lien lender settlementover the reorganizing process, which it says is not included in the disclosurestatement or otherwise publically available.

"Particularly disturbing, though, is how this impactsthe treatment of the secured first lien lender claims," it wrote. "Inessence, the first lien lenders themselves determine how much they will be paidunder plan based on the undisclosed terms of the first lien lender settlement.No other party in interest has any way to analyze the fairness orappropriateness of the first lien lender's treatment under the plan."

Alphafiled for bankruptcy in August of last year amid a host of market andregulatory challenges, as well as mounting debt tied to previous assetpurchases. The deadline for bidding on the company's core assets passed earlierthis week, with an auction scheduled on May 16 and a hearing to approve apotential sale scheduled for May 26. The company previously announced astalking horse bidder for the assets made up of a group of first lien lendersled by Citicorp North AmericaInc. The credit bid amountsto $500 million plus the assumption of liabilities.

Someof those liabilitieswere included in another objection to the company's disclosure statement filedby a collection of environmental groups on the same day.

TheSierra Club, West Virginia Highlands Conservancy and Ohio Valley EnvironmentalCoalition stated in a May 10 filing that the statement lacked vital informationabout Alpha's ability meet its environmental obligations following itsreorganization.

"Thedebtors have proposed to sell, transfer, or otherwise divest themselves oftheir most valuable and profitable assets prior to plan confirmation, but havenot demonstrated that any adequate cash consideration will flow to the debtors'estates to allow them to perform their nondischargeable court-ordered waterpollution treatment obligations and other reclamation obligations," thegroups wrote. "These deficiencies render the plan unconfirmable."

Arepresentative for Alpha was not immediately available for comment on theobjections.