Murray Metallurgical committee objects to Oak Grove sale procedures

By Caroline Salls

Pittsburgh, April 8 – Murray Metallurgical Coal Holdings, LLC’s official committee of unsecured creditors objected Tuesday to the bid procedures for the proposed sale of substantially all of the assets of Murray Oak Grove Coal, LLC, according to a filing with the U.S. Bankruptcy Court for the Southern District of Ohio.

As previously reported, the credit bid will be made by a new entity to be formed by principal stakeholders Murray Energy Corp. and MC Southwork LLC.

Specifically, the new company will credit bid up to $14.7 million of junior debtor-in-possession financing obligations and up to $3 million of pre-bankruptcy term loan obligations and will provide up to $50.26 million in new first-lien term loans to satisfy senior DIP facility claims, up to $120.76 million in new second-lien term loans and up to $45 million of new preferred equity.

“By the Oak Grove bid procedures motion, the debtors are proposing a sale of substantially all of the Oak Grove assets to the stalking horse bidder via a credit bid and debt exchange that cannot possibly lead to higher or better offers,” the objection said.

In doing so, the committee said the Murray parties and their lenders are attempting to impose the debt underlying a take-back facility on the acquiring entity of the Oak Grove assets.

In addition to seeking to impose the take-back facility debt on a newly formed entity with fewer assets to operate, the creditor group said the “sale process proposed by the debtors is riddled with serious defects that, if not corrected, will chill bidding and otherwise hand the debtors’ most valuable asset over to the stalking horse bidder.”

According to the objection, defects in the bid procedures include:

• While the minimum initial overbid no longer includes pre-bankruptcy term loan obligations, the Oak Grove bid procedures still characterize the stalking horse bid as “higher or otherwise better” until competing bids also provide for payment of those obligations;

• The bid procedures provide that in determining the highest or otherwise best bid, one dollar of the stalking horse bidder’s credit bid of a debtor-in-possession financing amount and the pre-bankruptcy term loan obligations must be equal to one dollar of cash bid by another bidder;

• The take-back facility, which was under-water and remained unpaid by the Murray debtors’ pre-bankruptcy and after the bankruptcy filing, should not be included as part of the stalking horse bidder’s credit bid;

• The bid procedures should make clear the total amount of the credit bid so other bidders will know the bid threshold for a competing bid;

• The bid procedures should not grant the stalking horse bidder an unfair advantage over other bidders before and during the auction “via imbalanced reporting requirements and other advantages baked into the proposed bid procedures;” and

• The bid procedures must require that all bidders bid in each round of the auction and must prohibit any bidder, including the stalking horse bidder, from sitting out for one or more rounds during the auction.

Murray Metallurgical is based in St. Clairsville, Ohio. The company filed bankruptcy on Feb. 11 under Chapter 11 case number 20-10390.

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