Walter Energy Seeks Creditor Accord Approval to Avoid `Crash'

Updated on
  • Coal miner's settlement allows Jan. 5 auction to go ahead
  • Judge warned reorganization would crash and burn without deal

Coal miner Walter Energy Inc. reached a settlement with creditors after a bankruptcy judge said the case would “crash and burn” if an agreement wasn’t secured.

The accord with a committee of first-lien lenders and the unsecured creditors’ committee allows the company to move forward with the scheduled Jan. 5 auction of its assets. The opening bid is an offer by lenders to exchange $1.25 billion in debt and $5.4 million cash for assets.

The settlement is “substantial achievement in the debtors’ efforts to preserve their businesses as going-concerns,” Walter Energy’s lawyers said Wednesday in a court filing.

U.S. Bankruptcy Judge Tamara O. Mitchell in Birmingham, Alabama, said in September that she feared “this case is going to crash and burn” if lenders and committees representing unsecured creditors and retired workers couldn’t put aside their differences.

Under the global settlement, the stalking horse, or lead bidder, agreed to assume up to $122 million in liabilities as part of the sale, unsecured creditors will get a 1 percent equity in the buyer, according to court documents. The unsecured creditors said it would agree to the sale motion.

The coal miner filed for bankruptcy in July after reaching an agreement with the lenders to support a reorganization plan that would hand them control of the company in exchange for about $1.9 billion in debt. The lenders later withdrew their support for the plan.

The case is In re Walter Energy Inc., 15-02741, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).