Murray Energy Corp. struck a deal for the financing needed to exit bankruptcy and disclosed some details about an agreement to settle claims against its founder and his family, according to recent court filings.
Murray Energy and its stalking horse bidder agreed to a new $45 million term loan facility from Silver Point Finance LLC that would allow the company to exit bankruptcy with enough liquidity to consummate a restructuring plan, Murray Energy said in a July 24 filing. The company also disclosed a $15.7 million settlement with founder Robert Murray, his family and affiliated trusts, who were facing various allegations from creditors that they treated the private coal miner as their own "piggy bank" ahead of the bankruptcy.
Claims against Murray family
A group of unsecured creditors had filed a complaint alleging that Murray and CEO, COO and CFO Robert Moore were grossly overcompensated compared to other coal executives despite the company's weak financial position. They also claimed that Murray and his family used corporate assets and funds for personal benefit while the company was allegedly insolvent.
Murray Energy is the largest privately held coal company in the United States.
As part of the settlement, the Murray family entities will contribute $15.7 million in cash to the company in exchange for certain property, the satisfaction of a loan and inclusion as a released party under terms of the restructuring. While $2.9 million will fund distributions to Murray Energy's junior funded debt and unsecured creditors, the remaining 81.5% will go to Murray Energy's operation and other emergence costs.
During a status hearing before the U.S. Bankruptcy Court for the Southern District of Ohio on July 27, an attorney representing an interested party and fellow coal miner, Consol Energy Inc., argued that Murray Energy had not given adequate disclosure of its bankruptcy plan. While the disclosure has a summary of committee views on potential causes of action against the Murray family, it does not explain how the parties reached the settlement they did, said Melissa Root, a restructuring attorney with Jenner & Block LLP.
"We don't have any disclosure on why or how the settlement was reached, why the amount is appropriate under the circumstances, et cetera," Root said during the status hearing.
During the status conference, Judge John Hoffman said the company should provide additional information about the settlement.
New exit financing agreement
The company financed its Chapter 11 bankruptcy cases through two debtor-in-possession, or DIP, financing facilities: a $350 million DIP term loan and a $90 million DIP, first-in, last-out facility. Both must be repaid in full or rolled into new facilities at the stalking horse bidder. While Murray Energy is proposing to roll the term loan into a new facility with the stalking horse bidder, they could not reach an agreement to roll its $90 million facility into a new facility at the stalking horse bidder.
The company contacted 27 potential lenders, including traditional banks and alternative lenders. Eleven parties executed nondisclosure agreements to consider financing, but ultimately only one party was interested. Murray Energy determined that because of the borrowing base restriction under that deal, it was not worth pursuing. Silver Point, a member of Murray Energy's ad hoc group of superpriority lenders, indicated a willingness to consider providing financing in early July.
"The debtors have determined, in their business judgment, that the exit facility provided by Silver Point represents the best terms available under the circumstances and provides a path to a going-concern sale, thereby maximizing the value of the debtors' estates for the benefit of all stakeholders," according to a request for approval of the exit financing.
For the exit financing, Silver Point required Murray Energy to obtain court approval of the exit financing motion by Aug. 6.
The company's exit financing requires a confirmation order from the bankruptcy court by Sept. 1 and the closing of a sale transaction by Sept. 15, noted Joe Graham, an attorney with Kirkland & Ellis LLP representing Murray Energy.
"Given the amount of time spent searching for financing solutions, we believe it is absolutely critical to meet those deadlines and not put them at risk," Graham said.