Murray Energy: Consol asks court to convert Chapter 11 bankruptcy case

By Caroline Salls

Pittsburgh, April 22 – Consol Energy Inc. is seeking conversion of Murray Energy Holdings Co.’s Chapter 11 case to Chapter 7, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Ohio.

Consol said Murray filed a motion on March 30 to suspend the Murray debtors’ obligations to pay for retiree health care under the Murray Energy Corp. Individual Employer Plan. In that motion, Consol said Murray disclosed some of the measures it had taken to preserve cash, including abandoning incentive and retention bonus plans for employees, limiting the amount paid to critical vendors, idling mines and requiring the chief executive officer’s approval of expenditures greater than $25,000.00.

However, the conversion motion said only recently has Murray indicated that the executive management team will receive a reduction of their salaries, and the Murray debtors continue to make interest payment to undersecured lenders.

At an April 14 hearing, Consol said Murray acknowledged that its negative financial performance created an alleged event of default on its $350 million debtor-in-possession term loan, resulting in the DIP lender’s refusal to allow the Murray debtors to draw on the remaining portion of the term loan and heightening the severity of the debtors’ ongoing liquidity concerns.

“Even though the debtors’ liquidity and overall financial outlook has been declining since the commencement of this case, the debtors argued in February that it was in their best interests to provide $10.7 million in capital to an affiliate and non-debtor in this case, Murray [Metallurgical],” the conversion motion said.

“Consol opposed such funding at the time due to the financial constraints it would put on this case, and the debtors’ interim 1113/1114 motion proves that such funding was just another example of the mismanagement of the estate.”

In addition, Consol said numerous creditors have come forward regarding the Murray debtors’ failure to make post-bankruptcy payments, and the company’s unpaid expenses will only continue to mount as a result of the its liquidity issues.

“While the debtors have implemented some ‘cash-preserving measures,’ they have failed to present any long-term plan to combat their financial struggle,” Consol said in the motion.

Consol said Murray also continues to incur substantial professional fees in attempting to maintain the Chapter 11 case, requiring the creditors to question whether the case is administratively insolvent in the wake of the deteriorating liquidity as administrative expenses require payment in full on the effective date of Murray’s Chapter 11 plan.

Based on the ongoing and worsening liquidity concerns, Consol said it is apparent that without a substantial infusion of liquidity from the DIP loan or otherwise, the Murray debtors have no reasonable likelihood of a rehabilitation.

If the court does not convert the case, Consol requested appointment of an examiner or Chapter 11 trustee as an alternative.

Murray Energy is a Saint Clairsville, Ohio, coal company. The company filed bankruptcy on Oct. 29 under Chapter 11 case number 19-56885.

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