Murray Energy DIP loan lender asks court to enforce financing order

By Caroline Salls

Pittsburgh, May 13 – Murray Energy Holdings Co. first-in, last-out debtor-in-possession facility lender GACP Finance Co., LLC asked the U.S. Bankruptcy Court for the Southern District of Ohio to enforce the final DIP financing order and preserve its collateral and ability to exercise its default-related rights under the credit agreement, according to a motion filed Wednesday.

“Murray Energy Corp. (MEC) and its debtor affiliates are engaging in blatant and unequivocal breaches of the DIP FILO lender’s only financial covenant under the DIP credit agreement,” GACP said in the redacted motion.

The lender said the Murray debtors are breaching the covenant by including non-coal receivables among a current assets report they are required to submit weekly without detailed backup regarding those receivables.

In addition, the lender said Murray included “questionable insider management fees due from related parties,” but failed to say whether those fees were “current or stale.”

GACP said the company included these items for the first time on April 30 because without those unauthorized receivables, it would have failed the DIP credit agreement’s current assets test.

According to the motion, under documents negotiated by the parties, current assets may only include coal receivables and inventory.

“Debtors’ default creates an urgent crisis for the DIP FILO lender,” the motion said. “Debtors’ most recent current assets reports show that the current assets supporting the DIP FILO lender’s loan are rapidly disappearing at an alarming rate, jeopardizing the DIP FILO lender’s ability to fully recover from the collateral the amounts due and owing from debtors on its $90 million loan.”

The lender said Murray’s coal receivables and inventory are already far below the $160 million floor set in the financial covenant.

GACP said the Murray debtors dispute that they have breached the credit agreement in the two recent reports by including non-coal receivables for the first time.

“While mindful of the process set forth in the final DIP order, the DIP FILO lender cannot wait for debtors to decide whether to challenge that these are (obvious) events of default,” the motion said.

Murray Energy is a Saint Clairsville, Ohio, coal company. The company filed bankruptcy on Oct. 29, 2019 under Chapter 11 case number 19-56885.

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