Murray Energy: At Odds With Lenders

The drama never ends where coal miner Murray Energy is concerned. The company – in the middle of a bankruptcy process – has fallen out with its lenders and been cut out from all financing at this critical time. That’s what company advisers explained to the bankruptcy judge on a teleconference. The company hopes to borrow $100mn with which to successfully exit from a bankruptcy that dates back to October and which has been made more problematic by the coronavirus situation. For all the BDC Credit Reporter’s prior articles, click here.

The WSJ reported ” Murray described its precarious financial position in an effort to suspend monthly payments it is making to cover retirees’ medical costs. Judge John E. Hoffman Jr., the bankruptcy judge hearing the case, granted Murray’s request, transferring these costs to government-backstopped funds that cover benefits for retired coal miners and their dependents.Murray said the change would save it $6 million to $8 million in cash every month. The company had said it might be forced to liquidate if required to continue making the retiree payments”.

None of this is good news for the BDC lenders who remain exposed to the troubled miner. At December 31, 2010 non-traded Cion Investments and Business Development Corporation of America (BDCA) are on the record as having $15mn in debt positions. That consisted of Debtor-In-Possession (DIP) and pre-bankruptcy debt positions. The latter were non-performing and deeply discounted and the former performing and valued above par at 2019 year-end.

Now, with even the DIP in danger; lenders and borrowers at each other’s throats and with the economic backdrop deteriorating, we have no idea what that debt might be worth, including the DIP. There is a scenario where almost none of the monies ever get returned. At this stage we don’t understand why lenders would consider a debt for equity swap or advance new funds. Given the general unrest maybe creditors will just throw up their hands and take the loss… We will provide an update when appropriate but consider the amounts that could yet be saved too small to make BDC exposure material any more.