by Roy M. Terry, Jr.
Lawyers from the bankruptcy team of Sands Anderson attended “first day” hearings in the Chapter 11 bankruptcy case of Alpha Natural Resources, Inc. (“Alpha”) and its 149 related companies held on August 4, 2015 in the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division. The bankruptcy case represents the latest significant filing in Richmond by a coal company, with James River Coal Company and Patriot Coal Corporation having filed before. Alpha cited rapidly falling coal prices, and weak demand for coal, as two contributing factors to it filing bankruptcy.
Alpha’s court presentation at the first day hearings made clear that this will be a reorganization case, as opposed to a quick sale and liquidation. Although much of its cash may be subject to liens of secured lenders, Alpha benefits from having nearly $1 billion cash on hand. A business plan is being prepared which will likely include a future downsizing of coal operations and diversification into natural gas.
Alpha’s bankruptcy case has been assigned to the Honorable Kevin R. Huennekens. There were 24 items heard as part of the first day hearings. All of the motions were approved by the court which will allow Alpha to continue to operate. Certain motions were allowed on an interim basis, with final hearings on certain motions, where necessary, to be heard on September 1.
Among the motions heard and approved by the court are the following:
1) “Essential Supplier”—This is a critical vendor motion defined “Essential Suppliers” as falling into several categories: safety equipment and service suppliers; environmental service providers; fuel, lubricant, chemical and mineral suppliers; and suppliers of specialized goods, and providers of specialized services. Rather than identifying specific Essential Suppliers with corresponding amounts, the Court authorized Alpha to pay out an aggregate of $44.5 million toward prepetition obligations owed to Essential Suppliers. The motion also puts procedures in place to deal with those Essential Suppliers who, despite an offer of payment toward a prepetition obligation, refuse to continue doing business with Alpha.
2) “Vendor Comfort”—This motion provides assurance to Alpha’s vendors that they will be paid for the provision of post-petition goods and services as a Chapter 11 administrative expense.
3) “503(b)(9) Procedures”—Where goods have been sold to Alpha in the ordinary course of business within 20 days prior to the bankruptcy filing, the value of those goods will be paid as an administrative expense of the bankruptcy case. A special form will be designed and available for claims made pursuant to this motion, or the regular proof of claim form can be used.
The only truly contested motion involved post-petition or “debtor in possession” financing. Interim approval was given for new financing by Citigroup Global Markets, Inc., which will replace the current lender General Electric Capital Credit. Opposition to the new financing—and, in particular, to the collateral securing the new lender—was led by a group of unsecured noteholders.
As mentioned, the next hearings in Alpha’s bankruptcy case are scheduled for September 1. Prior to that date, the creditors’ committee will likely be appointed by the United States Trustee from among those unsecured creditors listed by Alpha as being among its top 50 creditors, although other creditors can also seek committee appointment.
Read more business law articles at Virginia Business Lawyers
For more information about LexisNexis products and solutions, please connect with us through our corporate site.