In Re Alpha Natural Resources, Inc.

552 B.R. 314 (2016)

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Nature of the Case

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Facts

P is the largest domestic producer of coal by volume in the United States. P operated 145 mines and employed 14,500 individuals, generating $7 billion in revenue annually. In 2010, the coal industry began to experience serious market challenges. Both price and demand began to fall. That trend has continued. Between 2011 and 2015, the price of metallurgic coal fell 72%. During the same period, the price of steam coal fell 44%. There is too much supply and too little demand. P laid off approximately 46% of their non-union employees, and 32% of their union employees. By the time the Debtors filed Chapter 11, P had closed more than eighty mines. The total employment count had fallen from 14,500 to less than 8,000. The price of coal continued to fall. P has sustained over $300 million in losses since the Petition Date. P currently employs approximately 610 active employees who are represented by the UMWA. These collective bargaining agreements also provide benefits to approximately 2,600 retired union employees. The collective bargaining agreements result in higher labor costs compared to non-union workers. The collective bargaining agreements restrict P's ability to utilize subcontractors and to modify work schedules. P's average labor cost for an Active Union Employee is $92,442 as compared to $69,068 for a non-union employee. The collective bargaining agreements require P to make payments to the four different UMWA Funds for the benefit of the Retired Union Employees. P is also required to contribute to the two Coal Act Funds and adhere to other provisions of the Coal Act. On August 3, 2015, P filed chapter 11. P continued to manage their properties and operate their businesses as debtors in possession. The direction of the case switched course on February 8, 2016, when P filed a motion with the Court seeking authorization for a going-concern sale of substantially all of the Debtors' core, revenue-generating assets. P's pre-petition lenders agreed to serve as a stalking horse for the sale of the Debtors' Core Assets. The prepetition lenders initially agreed to credit bid $500 million for the Debtors' Core Assets. P proposed to sell their Core Assets as a going concern, free and clear of liens, claims, and encumbrances. The Stalking Horse Bidder has refused to assume any of the Debtors' liabilities and obligations under the Coal Act or to the UMWA Funds. It will not close the sale unless it can receive the Core Assets free and clear of P's obligations under their collective bargaining agreements. On March 28, 2016, P filed their Rejection Motion requesting the Court to grant permission: (i) to reject the collective bargaining agreements and the obligations included therewith by and between the Debtors and the UMWA pursuant to § 1113(c); (ii) to modify P's retiree benefit obligations to the UMWA Funds and under the Debtors' collective bargaining agreements pursuant to § 1114(g) of the Bankruptcy Code; and (iii) to modify P's' retiree benefit obligations under the Coal Act, including payments to the Coal Act Funds pursuant § 1114(g). The UMWA argues that §§ 1113 and 1114 are not available to P because it is liquidating and not reorganizing. The UMWA argues that P has not satisfied the required elements of §§ 1113 and 1114. Leading up to and following the filing of the Rejection Motion, P and the UMWA attempted to negotiate modifications to the collective bargaining agreements that would prevent an outright rejection of the agreements by P.