King Mountain Tobacco’s Chapter 11 plan effective as of Sept. 21

By Sarah Lizee

Olympia, Wash., Sept. 22 – King Mountain Tobacco Co., Inc.’s second amended Chapter 11 plan of reorganization went into effect on Wednesday, according to a notice filed with the U.S. Bankruptcy Court for the Eastern District of Washington.

As previously reported, the plan, which was confirmed on Sept. 16, gained the support of all major creditors following months of negotiations.

For the Alcohol and Tobacco Tax and Trade Bureau’s principal claim, starting with the first escrow release date in 2032 and continuing through each subsequent escrow release date until the claim is paid in full, the holder will receive distributions equal to 100% of all escrow funds that are subject to release on each date. Following the full payment of this claim, all distributions will be applied to the bureau’s penalties claim until paid in full.

In addition, the reorganized debtors will make monthly payments to the bureau in the amount of $150,000 for the first two years and $175,000 thereafter, until the claim is paid in full.

Also, following payment in full of class 3, 4, 5, 6, 7 and 9 claims, respectively, the amount payable on the bureau’s principal claim will be increased by the amount that was previously payable on the class 3, 4, 5, 6, 7 and 9 claims, until the principal claim is paid in full.

The bureau will also receive all net proceeds from the sale of farm equipment, Lone Warrior claims, Barnhouse claims and any other causes of action that arose prior to the effective date, distributions under a plan support agreement, and $5.5 million in cash.

On May 1 of each year, starting in 2023, the debtor will pay the bureau all cash on hand in excess of the then-applicable operating reserve, and on Dec. 1 of each year, starting in 2022, all cash on hand in excess of 120% of the then-applicable operating reserve, until the principal claim is paid in full.

And, starting in the first full month following the full payment of the principal claim, the debtor will pay the bureau all escrow account income until the penalties claim is paid in full.

The bureau will also receive all payments made on a settlement note and receivable note.

Interest will accrue following the effective date on the unpaid balance of the bureau’s claims at the rate of 2.5% per year.

The secured claim of the Internal Revenue Service will be paid in full.

For the unsecured claim of Indiana, the debtor will make monthly deposits into an escrow account in the amount of $35,000 each until paid in full. No interest will accrue on this claim.

For the unsecured claim of South Carolina, the debtor will make monthly deposits into an escrow account in the amount of $24,000 each until paid in full. No interest will accrue on this claim.

For the unsecured claim of the U.S. Department of Agriculture, the debtor will make monthly deposits into an escrow account in the amount of $45,000 each until paid in full. Interest will accrue at the rate of 2.5% per year until paid in full.

For the unsecured claim of the Food and Drug Administration, the debtor will make monthly deposits into an escrow account in the amount of $40,000 each until paid in full. Interest will accrue at the rate of 1% per year until paid in full.

Holders of other unsecured claims will receive, on a monthly basis, a pro rata share of a total monthly payment of $20,000, until all claims in this class are paid in full. Simple interest will accrue on the unpaid balance of these claims at the Federal Judgment Rate.

Administrative convenience claims will be paid in cash in full. Holders of unsecured claims of more than $2,500 wanting treatment in this class may elect to reduce their claims to $2,500.

Equity interests will be retained.

King Mountain Tobacco is a White Swan, Wash.-based tobacco manufacturer owned and operated by citizens of the Yakama Nation. The company filed Chapter 11 bankruptcy on Sept. 25, 2020 under case number 20-01808.

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