Initial Relief Granted in Murray Energy Bankruptcy Hearing
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CINCINNATI -- Judge John Hoffman granted the initial relief Murray Energy Corp. sought during the company's first hearing in U.S. Bankruptcy Court for the Southern District of Ohio on Wednesday.
Murray Energy filed for Chapter 11 protection on Tuesday, citing $1.7 billion in debt and the need to restructure in the face of a challenging market for thermal coal as reasons for doing so. On Wednesday, several representatives of the company, including Robert D. Moore, the new president and CEO of Murray Energy, Murray Energy Corp. and Murray NewCo., a company being formed to acquire Murray Energy's assets, were present in the Cincinnati courtroom to make their case to Hoffman.
During the four-hour hearing, those representatives outlined the firm's restructuring plan for the judge, including details of its new financing agreements. They made the case that Murray will remain in business following its restructuring, citing contracts that already are in place requiring Murray to deliver millions of tons of coal to customers over the course of several years.
They pointed out that Murray has "more longwall operations than any" other company and that longwall mining is "the most efficient way to mine coal." They said this is the reason Murray's operations have been efficient enough to avoid bankruptcy to this point, while more than 40 other coal companies have filed for such protection since 2008.
According to information presented to the court, Murray's corporate and capital structures are "quite complicated" with the company making more than $298 million in annual debt service payments and meeting $160 million in obligations to employees in the past 12 months. Additional challenges the company is facing include declining demand for and exports of coal, government regulations on the burning of coal, competition from natural gas and renewable fuel sources in the energy market and the ongoing trade war with China.
Attorneys for Murray made motions Wednesday seeking court approval of a new $440 million financing package. It includes $127.2 million in immediate relief so that Murray can make interest payments that were delayed in September and early- to mid-October and continue to meet obligations such as payroll.
Another motion sought approval of the company's cash management plan, which would allow Murray to keep its accounts open and to conduct transactions as usual.
Hoffman approved those motions as well as motions that will allow the company to pay employee wages and benefits as normal, pay its vendors for goods and services as needed, continue to meet its contractual obligations to produce and deliver coal, to pay its taxes and to set aside $2.2 million as adequate assurance for utility companies. Officials said $2.2 million represents about half of Murray's monthly utility expenses at its multiple mines and loading facilities.
A couple of objections to Murray' plan were raised by the United Mine Workers of America, which represents about 2,400 of the company's 5,300 employees, according to information provided to the court. At least one of those concerns was resolved prior to the opening of the hearing. The other brought brief testimony from a union official who was concerned about guarantees of employment and benefits for those workers.
Black Diamond Financial Group, which was classified as one of Murray's "junior lenders," also objected to some of the restructuring agreement's terms, including the request for immediate financial relief. Black Diamond sought more time to become involved with any potential refinancing.
Hoffman, however, said he wasn't "willing to play poker" with the future of the company or its workers. He overruled the objections and granted approval of all motions presented Wednesday, saying it was necessary relief for "a troubled industry at a difficult time."
"The Court has looked at the declarations closely …. and finds that the DIP is necessary to avoid immediate and irreparable harm" to the company, Hoffman said.
Murray's corporate headquarters is located just west of St. Clairsville, and the company founder, Robert E. Murray, is a Bethesda native. He will remain as chairman of the board. In total, Murray Energy has 15 active mines with 12 underground longwall mining systems and 42 continuous mining units. The company also operates 10 coal transloading facilities and five mining and equipment factory and fabrication facilities in multiple states and in Colombia, South America.