Walter Energy plan provides for $1.9 billion secured debt conversion

By Caroline Salls

Pittsburgh, Aug. 27 – Walter Energy, Inc. filed its plan of reorganization and related disclosure statement Wednesday with the U.S. Bankruptcy Court for the Northern District of Alabama.

The company said in the disclosure statement that the plan calls for a conversion of $1.9 billion Walter’s pre-bankruptcy secured debt to equity.

In addition, Walter Energy said confirmation of the plan depends on its ability to significantly reduce legacy labor debt and existing labor costs. As a result, the company said it will engage in negotiations with the United Mine Workers of America to obtain employee and retiree cost savings.

The company said its restructuring support agreement requires it to proceed with a sale process concurrently with its plan confirmation efforts.

If Walter Energy fails to rationalize labor costs and liabilities or achieve other case milestones, it will exclusively look to sell substantially all of its assets through a court-approved process and withdraw the plan, the disclosure statement said.

Treatment of creditors will include the following:

• Administrative claims, priority tax claims and other priority claims will be paid in full in cash;

• First-lien undrawn revolving claims will be either reinstated or replaced in full by letters of credit;

• Holders of first-lien other debt claims will receive a share of the stock distribution;

• The treatment of second-lien note claims and general unsecured claims is to be determined;

• Other secured claims will either be reinstated or holders will be paid in full in cash or receive the collateral securing the claim;

• Intercompany claims and intercompany interests will either be reinstated, released, waived and discharged, treated as a dividend or contributed to capital or exchanged for equity of a subsidiary of Walter Energy; and

• Holders of old common stock will receive no distribution.

Walter Energy, a metallurgical coal producer based in Birmingham, Ala., filed for bankruptcy on July 15 in the U.S. Bankruptcy Court for the Northern District of Alabama. The Chapter 11 case number is 15-02741.

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