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June 5, 2019 – The Court hearing the Westmoreland Coal Company cases issued an order approving the WMLP Debtors' Disclosure Statement and confirming the Debtors' Amended Joint Plan of Liquidation for the WMLP Debtors as modified.
In what was effectively the last piece of the pre-confirmation puzzle, also on June 5, 2019, the Court issued an order authorizing the Debtors to (i) enter into an asset purchase agreement (the "Credit Bid APA") with Kemmerer Operators, LLC (the "Credit Bid Purchaser") further to which the Credit Bid Purchaser will acquire the Debtors' Wyoming-based Kemmerer mining assets for a $300.0mn credit bid (the "Kemmerer Assets" and "Sale," respectively) and (ii) consummate the Sale [Docket No. 1966]. The Credit Bid Purchaser is an entity set up by the Debtors' pre-petition senior lenders (the "MLP Secured Lenders") to purchase the Kemmerer Assets following the collapse of the previously approved sale to Western Coal Acquisition Partners, LLC ("Western Coal," a subsidiary of Tom Clarke's Clarke Investments) due to an inability of Western Coal to secure a necessary reclamation bond.
The most straighforward ex post overview of the Plan is provided in a declaration filed in support of Plan confirmation (Docket No. 1904, filed before the Kemmerer Sale received Court approval). That declaration stated: "The Plan is the culmination of the WMLP Debtors' efforts to sell substantially all of their assets on a going concern basis. Before filing these Chapter 11 Cases, the WMLP Debtors had determined that it was in the best interest of their respective estates to sell all or substantially all of their respective assets, which were comprised primarily of thermal coal mining operations in Ohio and Wyoming.
Following a nearly six-month marketing process, the WMLP Debtors successfully sold their Ohio mining operations (along with an inactive Kentucky mine) on a going concern basis to CCU Coal and Construction, LLC (‘CCU’). Nearly a month later, the ongoing marketing process yielded a buyer—Western Coal Acquisition Partners, LLC (‘Western Coal’)—for the Kemmerer mine in Wyoming.
After the Court approved the sale of the Kemmerer mine to Western Coal and the WMLP Debtors built consensus through good faith, arm's-length negotiations, the WMLP Debtors filed the original version of the Plan. That version of the Plan was predicated on the WMLP Debtors' consummating the Western Coal sale.
Subsequently, Western Coal terminated the asset purchase agreement underlying the Western Coal sale and the WMLP Debtors determined to instead pursue a sale of the Kemmerer mine to the WMLP Secured Lenders pursuant to a credit bid. Thereafter, the WMLP Debtors entered into the Kemmerer APA with Kemmerer Operations, LLC, an acquisition entity formed by the WMLP Secured Lenders, to acquire the Kemmerer mine and certain other assets (the ‘Kemmerer Sale’). Accordingly, the WMLP Debtors amended the Plan to account for changes to the terms of the Kemmerer Sale. While the WMLP Debtors were pivoting to the Kemmerer Sale, the WMLP Debtors reengaged with their constituents to rebuild the consensus they had enjoyed for the original Plan when it was predicated on the Western Coal sale. As a result of good faith and arm's length negotiations, the WMLP Debtors have achieved a global resolution of issues among the WMLP Debtors, the WMLP Secured Lenders, and the Creditors' Committee and won their support for the current version of the Plan.
Should the Court approve the Kemmerer Sale [which has happened], as the WMLP Debtors have separately requested, the Plan provides mechanisms for the WMLP Debtors to orderly wind up their respective Estates. The Plan maximizes the value of the WMLP Debtors' Estates in light of the sales of the Estates' assets. And, as set forth below, the Plan satisfies all requirements for its confirmation under chapter 11 of the Bankruptcy Code. Therefore, the Court should overrule all Objections (as defined below) and confirm the Plan."
Summary of classes, claims, voting rights and estimated recoveries:
- Class 1 (“Priority Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Estimated aggregate claims are $1.0mn and estimated recovery is 100%.
- Class 2 (“Credit Agreement Claims”) is impaired and entitled to vote on the Plan. Estimated aggregate claims are $326,878,887.87 and estimated recovery is 20% to 40%. The ultimate recovery to Holders of Credit Agreement Claims may be substantially different than the Projected Recovery. The ultimate recovery will depend on (a) the amount of future distributions under the Kemmerer Notes, which are being distributed to Holders of Credit Agreement Claims under the Kemmerer Sale (and not the Plan) and (b) the cash and other proceeds available for distribution to the Holders of Credit Agreement Claims pursuant to the Plan.
- Class 3 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Estimated aggregate claims are $900,000 and estimated recovery is 100%.
- Class 4 (“General Unsecured Claims”) is impaired, presumed to reject and not entitled to vote on the Plan. Estimated aggregate claims are $8.0mn to $24.0mn and estimated recovery is 0%.
- Class 5 (“WMLP Intercompany Claims”) is impaired, presumed to reject and not entitled to vote on the Plan. Estimated aggregate claims are N/A and estimated recovery is 0%.
- Class 6 (“WMLP Interests and WMGP Interests”) is impaired, presumed to reject and not entitled to vote on the Plan. Estimated aggregate claims are N/A and estimated recovery is 0%.
- Class 7 (“Subsidiary Interests”) is unimpaired, presumed to accept and not entitled to vote on the Plan. Estimated aggregate claims are N/A (reinstated) and estimated recovery is 0%.
On June 4, 2019, the Debtors' claims agent notified the Court of Plan voting results [Docket No. 1948] which were as follows:
- Class 2 (“WMLP Credit Agreement Claims”) – 8 claims holders, representing $326,377,791.89 in amount and 100% in number, accepted the Plan.
This class was comprised of the MLP Secured Lenders who credit bid $300.0mn of their claims for the Debtors' Wyoming-based Kemmerer mining assets.
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