Pour one out for the fine folks of eastern Kentucky and western Virginia. They can’t seem to catch a break.

Earlier this week, Cambrian Holding Company Inc. (and its affiliate debtors) joined a long line of coal producers/processors (e.g., Cloud Peak Energy, Westmoreland Coal, Mission Coal) who have recently filed for bankruptcy. The company employees approximately 660 people, none of whom are members of a labor union (in contrast to bigger, more controversial, coal filings, i.e., Westmoreland) and most of whom must be fretting over their futures. They must really be getting tired of all of the post-election “winning” that’s going on in coal country.

The company’s problems appear to start in 2015, at the time the company acquired TECO Coal LLC and assumed $40mm of workers’ compensation and black lung liabilities that TECO had previously self-insured. The company sought to leverage its broader scale to increase production but it failed to raise the working capital it needed to live up to its obligations and sustain production at levels necessary to service the company’s balance sheet. Post-acquisition, the company doubled revenues, but it couldn’t sustain that progress and nevertheless recorded net losses from 2015 through 2018. In turn, the company triggered financial covenant and other defaults under its ABL Revolver and Term Loan.

In other words, the company has been in a state of emergency ever since the acquisition. Almost immediately, the company “undertook various efforts to return to a positive cashflow,” which, as you might expect, meant idling or closing certain mining operations, stretching the usable life of equipment, and laying off employees.* Its efforts proved fruitless. Per the company:

Notwithstanding these efforts, the Debtors have been unable to overcome the pressures placed on their profit margins from steadily declining coal prices (along with burdensome regulations and the accompanying decline in demand for coal), all of which have contributed to the Debtors’ substantial negative cashflow and inability to consummate a value-enhancing transaction.

So, what now? The company, with assistance from Jefferies LLC, will attempt to find a buyer willing to catch a falling knife: the plan is to “commence an expeditious sale and marketing process” of the company’s assets (call us crazy, but shouldn’t it be the other way around?). To fund this process, the company has a DIP commitment from affiliates of pre-petition lenders for $15mm.**

*Interestingly, it was in March 2016 when Hilary Clinton infamously stated, “Because we're going to put a lot of coal miners and coal companies out of business.” At the time, Cambrian was already struggling, laying off people in an attempt to generate positive cashflow. That message really must’ve struck a chord down in coal country. WHOOPS.

**The Term Lenders swiftly objected to the terms of the DIP and the use of cash collateral.

Another week, another chapter in the Jay Alix and McKinsey drama. And, seriously, folks, this sh*t is fiercer than a White Walker facing off against some dragons so hold on to your seats.

On Tuesday, Law360 reported:

Restructuring consultant Jay Alix again urged a New York bankruptcy court on Tuesday to let him investigate McKinsey & Co. over alleged conflicts of interest in the SunEdison Inc. Chapter 11 case, just days after McKinsey revealed that it paid $17.5 million to SunEdison’s estate to resolve nearly identical claims.

Tuesday’s motion comes as U.S. Bankruptcy Judge Stuart M. Bernstein is considering whether to take additional action in the SunEdison case, or let the $17.5 million settlement end matters as far as McKinsey is concerned.

And on Wednesday:

Alix’s filing in the SunEdison case comes as a Texas bankruptcy court rejected his pleas to dig further into McKinsey in the case of the Westmoreland Coal Company, which emerged from bankruptcy last month and is another McKinsey client.
The conflict of interest claims Alix raised in that case forced McKinsey to disgorge $5 million in fees in a settlement with Westmoreland’s estate, but on Wednesday U.S. Bankruptcy Judge David R. Jones shot down Alix’s request for an “emergency order” that would allow him to conduct further discovery.

Indeed, Mr. Alix sought an “emergency motion” for entry of an order compelling McKinsey to disclose all of the investments of its affiliate MIO Partners Inc. Mr. Alix wrote:

The time to move forward on Mar-Bow’s objection and determine whether McKinsey is qualified to serve as a professional in this matter is long overdue. It is notable that McKinsey has never denied the MIO’s holdings in the Debtors’ estates or in interested parties. Accordingly, this emergency motion seeks prompt and highly discrete relief: an order compelling McKinsey to (a) identify all equity or debt investments held or managed by it or any of its affiliates (including MIO) in any Debtor, or in any party in interest, competitor, customer, or supplier; and (b) disclose information sufficient to allow the Court to evaluate the amount and nature of those investments.

The judge — perhaps a bit miffed that his docket had been completely overrun by motion practice relating to the Alix/McKinsey dispute…you know, rather than issues specific to the actual Westmoreland Coal Company matter — summarily dismissed the motion. In an order issued on Wednesday April 10, 2019, he wrote:

At best, the motion represents a self-created emergency with no underlying substance. At worst, the motion constitutes an improper collateral attack on the Court’s prior order at Docket No. 1427 for an illegitimate purpose. Counsel are advised that they are responsible for the words and allegations contained in pleadings on which their names appear. Candor and professionalism must never be sacrificed in the name of overzealous advocacy.

ZING!

Of course, we find this language to be a wee bit hypocritical coming from a Judge who has skewered professionals of all types — lawyers, service providers, whomever — from his perch on the Bench. As just one example, recall this classy bit from an August 4, 2016 hearing in the matter of Sherwin Alumina Company LLC (that related to the Noranda Aluminum matter too):

You are on my radar screen. The financial transaction that ought to be being discussed a first-year business student can see. I’m not the smartest guy in the world, and I see it. I have been reading pleadings. And I cannot express the degree of disappointment that I have in the professionals that have been running these cases. If this case is going to fail, if the Noranda cases are going to fail, then so be it. But that’s going to create a block of time, and I’m going to use all of my education, all of my training, all of my experience in deciding where to lay the blame for this failure. That’s not a threat; it’s a promise. And if anyone wants to test my resolve, I encourage them to do it. Anyone doubts my commitment? Noranda’s local counsel spent a lot of years with me. They know exactly how I can be. You all are a talented group of people. I find it offensive that egos have gotten in the way. If we really want to try and have a contest as to who’s got the biggest set, I promise you I will win that battle.

“That’s not a threat; it’s a promise.” Really?

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