623 B.R. 444 (Bankr. S.D. Ohio 2021)

From Casetext: Smarter Legal Research

In re Murray Metallurgical Coal Holdings

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

Jan 11, 2021

623 B.R. 444 (Bankr. S.D. Ohio 2021)

Opinion

Case No. 20-10390

2021-01-11

IN RE: MURRAY METALLURGICAL COAL HOLDINGS, LLC, et al., Debtors.

Thomas R. Allen, Rick L. Ashton, James A. Coutinho, Richard K. Stovall, Matthew M. Zofchak, Allen Stovall Neuman Fisher & Ashton LLP, Columbus, OH, for Debtors. Jeremy Shane Flannery, Office of the United States Trustee, Mary Anne Wilsbacher, USDOJ - Office of the U.S. Trustee, Columbus, OH, Benjamin A. Sales, Office of the United States Trustee, Monica V. Kindt, Cincinnati, OH, for U.S. Trustee.

John E. Hoffman, Jr., United States Bankruptcy Judge

Thomas R. Allen, Rick L. Ashton, James A. Coutinho, Richard K. Stovall, Matthew M. Zofchak, Allen Stovall Neuman Fisher & Ashton LLP, Columbus, OH, for Debtors.

Jeremy Shane Flannery, Office of the United States Trustee, Mary Anne Wilsbacher, USDOJ - Office of the U.S. Trustee, Columbus, OH, Benjamin A. Sales, Office of the United States Trustee, Monica V. Kindt, Cincinnati, OH, for U.S. Trustee.

OPINION ON CONFIRMATION OF THE DEBTORS' THIRD AMENDED CHAPTER 11 PLAN (DOC. 691)

John E. Hoffman, Jr., United States Bankruptcy Judge

I. Introduction...

II. Jurisdiction and Constitutional Authority...

III. Factual and Procedural Background...

A. The Debtors' Corporate Structure...

B. The Debtors' Business...

C. The Mission Coal Acquisition...

D. Events Leading to the Debtors' Chapter 11 Filings...

E. The Debtors' Prepetition Capital Structure...

F. The RSA...

G. Significant Events in the Chapter 11 Cases...

1. DIP Financing...–––– 2. The Critical Vendor Dispute...–––– 3. Appointment of the Committee...–––– 4. The Maple Eagle Sale...–––– 5. The Oak Grove Sale...–––– 6. The Bay Point Litigation...–––– a. Valuation of Bay Point's Collateral...–––– b. Bay Point's § 1111(b) Election...–––– 7. Filing of the Plan and Disclosure Statement...

H. Sources of Plan Funding...

I. The Structure of the Plan...

1. Unclassified Claims...–––– 2. Classification and Treatment of Claims and Interests...–––– a. Non-Voting Classes...–––– b. Class 3–Prepetition Term Loan Claims...–––– c. Class 4–Bay Point Secured Claim...–––– 3. The Wind-Down Trust and Plan Administrator...–––– 4. Treatment of Avoidance Actions...–––– 5. The Exculpation Clause...

J. Exit Capital Structure...

K. The Confirmation Hearing...

L. Confirmation Testimony...

1. Robert D. Moore...–––– 2. Franklind Lea...–––– 3. Jeremy Matican...

IV. Legal Analysis...

A. Section 1129(a)(1)...

1. The UST Objection...–––– 2. The Funds Objection...–––– a. The Oak Grove Avoidance Actions Are Property of the Estate...–––– i. Section 541(a)(1)...–––– ii. Sections 541(a)(3) and (a)(4)...–––– iii. Section 541(a)(7)...–––– iv. Abandonment...–––– b. The Sale of the Oak Grove Avoidance Actions Benefits the Debtors' Estates...–––– c. The Debtors May Sell Their Contingent Interest in the Proceeds of the Oak Grove Avoidance Actions...

B. Section 1129(a)(3)...

C. Section 1129(a)(7)...

D. Section 1129(a)(11)...

E. Section 1129(b) and the Bay Point Objection...

1. Unfair Discrimination...–––– 2. Fair and Equitable Treatment...

V. Conclusion...

I. Introduction

This contested matter arises in the jointly administered Chapter 11 cases of Murray Metallurgical Coal Holdings, LLC ("Murray Met") and its affiliated debtors and debtors in possession (collectively, the "Debtors"). Murray Met filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on February 11, 2020, followed by the other Debtors on February 12, 2020 (the "Petition Date"). After having obtained approval of their disclosure statement (the "Disclosure Statement") (Doc. 516), the Debtors now seek confirmation of their third amended Chapter 11 plan, which they filed on August 14, 2020 (the "Plan") (Doc. 691). The Debtors' major constituencies, including the Official Committee of Unsecured Creditors (the "Committee"), the United Mine Workers of America ("UMWA"), and MC Southwork LLC ("MC Southwork")—in its roles as the Debtors' principal prepetition secured creditor, senior DIP lender, co-owner of the entity purchasing substantially all of the assets of Debtor Murray Oak Grove Coal, LLC ("Murray Oak Grove") and exit lender—support confirmation of the Plan. Multiple parties filed objections to confirmation, most of which were resolved consensually. Three parties went forward with their objections to confirmation of the Plan: the United States Trustee (the "UST"), the UMWA 1974 Pension Plan and Trust and the UMWA 1993 Benefit Plan (collectively, the "UMWA Funds"), and Bay Point Capital Partners II, LP ("Bay Point"). See Docs. 617 (the "UST Objection"), 610 (the "Funds Objection") & 699 (the "Bay Point Objection"). The Debtors filed a brief in support of confirmation (Doc. 707) and an omnibus reply to the objections (the "Omnibus Reply") (Doc. 709). The Court issued an oral ruling on confirmation on November 25, 2020 and entered an order confirming the Plan (Doc. 798) that same day, stating that a written opinion further explaining the rationale for its decision would follow. This is that opinion.

The following parties filed objections to confirmation that were resolved by agreement with the Debtors: Cayce Mill Supply Co. (Doc. 594); Natural Resource Partners L.P. (Doc. 603); Motion Industries, Inc. (Doc. 606); Warrior Met Coal Mining, LLC (Doc. 611); Crucible, LLC (Doc. 612); Indemnity National Insurance Co. (Doc. 609); and the United States, on behalf of the Department of the Interior and the Environmental Protection Agency, and the State of Alabama (Doc. 632).

II. Jurisdiction and Constitutional Authority

The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). This is a core proceeding. 28 U.S.C. § 157(b)(2)(L), (N). Because disputes over plan confirmation and the sale of assets "stem[ ] from the bankruptcy itself," the Court also has the constitutional authority to enter a final judgment in this contested matter. Stern v. Marshall , 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011).

III. Factual and Procedural Background

A. The Debtors' Corporate Structure

Murray Met is the parent debtor in these jointly administered Chapter 11 cases, and is an unrestricted subsidiary of Murray Energy Corporation ("Murray Energy"). Murray Energy, along with its parent, Murray Energy Holdings Co., and nearly 100 other affiliates (the "Murray Energy Debtors"), are debtors in a separate group of Chapter 11 cases, which were filed on October 29, 2019. At the time they filed their Chapter 11 cases, the Murray Energy Debtors together comprised the largest privately-owned coal company in the United States, producing in 2018 about 53 million tons of thermal coal used by the electric utility industry and employing nearly 4,000 workers, including approximately 2,000 employees covered by a collective bargaining agreement with the UMWA. The following chart illustrates the Debtors' corporate structure and how they fit into the overall corporate structure of the Murray Energy Debtors:Disclosure St. at 20.

Many of the facts set forth in the Factual and Procedural Background portion of this opinion are drawn from the Court's previous decisions in this case and are not disputed. SeeIn re Murray Metallurgical Coal Holdings, LLC , 618 B.R. 825 (Bankr. S.D. Ohio 2020) ; Murray Oak Grove Coal, LLC v. Bay Point Capital Partners II, LP (In re Murray Metallurgical Coal Holdings, LLC) , 618 B.R. 220 (Bankr. S.D. Ohio 2020) (the "Valuation Decision"); In re Murray Metallurgical Coal Holdings, LLC , 614 B.R. 819 (Bankr. S.D. Ohio 2020) ; In re Murray Metallurgical Coal Holdings, LLC , 613 B.R. 442 (Bankr. S.D. Ohio 2020). For the sake of readability, the Court will omit citations to its prior opinions.

B. The Debtors' Business

While the Murray Energy Debtors engaged in the mining and sale of thermal coal, the Debtors mine and sell metallurgical coal. Metallurgical coal is used to produce coke, which in turn is used in the production of steel. The Debtors' assets include a mining complex located in Bessemer, Alabama (the "Oak Grove Mine") that employs 511 people, including 389 union workers, and contains approximately 40 million tons of recoverable coal. Disclosure St. at 21. The Oak Grove Mine is an underground longwall mining operation. The Debtors also own a mine known as the Maple Eagle No. 1 Mine (the "Maple Eagle Mine") in Powellton, West Virginia. The Maple Eagle Mine is a surface and underground continuous mining complex that, as of the Petition Date, employed 18 workers and contained approximately 18 million tons of recoverable coal. Id.

The Murray Energy Debtors' Chapter 11 plan, which was confirmed by an order entered on August 31, 2020 (No. 19-56885, Doc. 2135), provided for the sale of substantially all of their assets as a going concern.

A longwall mine is developed by digging two parallel tunnels through the surface of the earth. The parallel tunnels, which are the entry and exit points for the mine, are known as the "headgate" and "tailgate" sides. They are connected underground by a perpendicular tunnel that exposes the face of the longwall "panel," a large rectangular block of coal averaging several yards in height that can range from around 2,000 to more than 20,000 feet in length and from about 500 to over 1,500 feet in width across the face of the panel. Mining begins at the longwall face and moves through the coal deposit (the "seam") toward the entrance of the mine. Multiple supports, known as shields, are installed side by side along the face of the longwall to support the roof during the mining process. Gate shields are placed at the headgate and tailgate ends of the mine, and face shields are installed along the face in between the gate shields. Each shield somewhat resembles a large "C," with the open end placed against the face of the longwall panel and the top (known as the canopy) installed against the roof immediately adjacent to the longwall. Underneath the canopy of the shields, a shearing machine moves back and forth across the face, cutting the coal from the face and spilling it onto a conveyor belt that carries the coal out of the mine. The shields protect the workers and the equipment located on the face. After a certain thickness of coal is removed, the shields advance forward toward the newly exposed face, and the roof collapses behind the closed end of the shields.

The Debtors sell their coal exclusively to Javelin Global Commodities (UK) Ltd. ("Javelin Global"), an affiliate of Murray Energy that is a "global commodities trading, logistics, operations, and investment company focusing on thermal and metallurgical coal, iron ore, steel and steel scrap, oil and gas, and related markets." Doc. 4 (Declaration of Robert D. Moore in Support of Chapter 11 Petitions) ¶ 42. Javelin Global markets and sells coal purchased from the Debtors to third-party customers. Disclosure St. at 22.

C. The Mission Coal Acquisition

In the spring of 2019, Murray Metallurgical Coal Properties, LLC, a subsidiary of Murray Energy ("Murray Met Properties"), and Javelin Investment Holdings LLC ("Javelin Investments") formed Murray Met as a new unrestricted joint venture subsidiary for the purpose of acquiring certain assets, including the Oak Grove Mine, of a metallurgical coal producer known as Mission Coal Company, LLC ("Mission Coal"). Id. at 20. Several months earlier, in the fall of 2018, Mission Coal and certain of its affiliates (the "Mission Coal Debtors") had commenced Chapter 11 cases in the United States Bankruptcy Court for the Northern District of Alabama (the "Alabama Bankruptcy Court"). At the time they commenced those cases, the Mission Coal Debtors had approximately $175 million in secured debt, including about $104 million under a first lien secured term loan (the "First Lien Loans") and $71 million under a second lien secured term loan. The First Lien Loans arose under a credit agreement between Mission Coal and lenders MC Southwork and Coal Specialty Funding, II ("Coal Specialty Funding" and, together with MC Southwork, the "Mission Coal DIP Lenders"). The First Lien Loans were secured by senior liens on substantially all of the assets of the Mission Coal Debtors.

The Mission Coal DIP Lenders provided a debtor in possession financing facility to the Mission Coal Debtors, which the Alabama Bankruptcy Court approved on a final basis in November 2018. The Alabama Bankruptcy Court's final DIP financing order provided for the roll-up of the First Lien Loans into the Mission Coal DIP loan along with $54.4 million of additional new money commitments, for a total DIP credit facility of approximately $201 million.

In connection with an auction for the sale of the assets of the Mission Coal Debtors, the Mission Coal DIP Lenders provided an opening bid for certain of those assets, including a credit bid of at least $145 million, plus additional cash consideration of $38 million, the assumption of certain liabilities, and the funding of certain wind-down escrow accounts. The auction for the Mission Coal assets did not generate a cash bid that would have fully satisfied the Mission Coal DIP Lenders' claims.

Together with Javelin Global, MC Southwork and Murray Energy submitted a bid for the acquisition of the Oak Grove Mine and other mining assets through an entity that ultimately became Murray Met. This bid was declared to be the highest and best offer for the assets. The total consideration paid by Murray Met was $264.7 million, including $160 million in the form of a take-back debt facility (the "Take-Back Facility") payable to the Mission Coal DIP Lenders (MC Southwork and Coal Specialty Funding) and $42.8 million in cash payable to the bankruptcy estates of the Mission Coal Debtors. The parties to the credit agreement governing the Take-Back Facility (the "Prepetition Term Loan Credit Agreement") are Murray Met as borrower, Wilmington Savings Fund Society, FSB as administrative agent, certain lenders (including MC Southwork and Coal Specialty Funding) (the "Prepetition Term Loan Lenders"), and guarantors. Id. at 26. The loans issued under the Prepetition Term Loan Credit Agreement are secured by substantially all of the assets of Murray Met and each of its subsidiaries. In addition to assuming certain loan obligations of Mission Coal through its entry into the Prepetition Term Loan Credit Agreement, Murray Met paid $31.7 million in estimated cure costs, tax liabilities, postpetition payables and other administrative expenses upon the closing of the sale. The bid also provided for (1) the infusion of $10 million of cash on Murray Met's balance sheet to fund the operation of the metallurgical mining complexes after the closing and (2) the assumption of approximately $70 million in reclamation liabilities. The Alabama Bankruptcy Court approved the sale of the Mission Coal assets to Murray Met (the "Mission Acquisition") in April 2019.

D. Events Leading to the Debtors' Chapter 11 Filings

Metallurgical coal is a commodity, and its price is tied to domestic and international demand for steel. After Murray Met completed its purchase of the assets of the Mission Coal Debtors, there was a sharp reduction in the price of metallurgical coal, and as a result Murray Met had significant negative operating cash flow, leading it to "hot idle" the Oak Grove Mine and the Maple Eagle Mine in the fall of 2019. Thus, as of the Petition Date, Murray Met was not mining coal from the mines but was maintaining them in anticipation that mining operations would resume in the future.

Facing these adverse market conditions, the Debtors took several steps to address their liquidity needs. To begin with, Murray Met entered into a first amendment to the Take-Back Facility, under which Murray Energy provided $3.5 million on the same terms as the original facility. Then, during the weeks leading up to the Petition Date, Murray Met obtained advances from MC Southwork and Murray Energy under a bridge loan facility (the "Bridge Loan Facility"). These bridge loans were advanced in connection with a third amendment to the Take-Back Credit Facility, which established shorter maturity dates for the bridge loans. Of the total $21.5 million provided under the Bridge Loan Facility, MC Southwork contributed $14.4 million and Murray Energy $7.1 million. Disclosure St. at 27.

E. The Debtors' Prepetition Capital Structure

As of the Petition Date, the Debtors' total indebtedness was approximately $270 million, comprised of the following (approximate) obligations:

• $169 million in principal and interest due to the Prepetition Term Loan Lenders under the Take-Back Facility;

• $21.5 million due under the Bridge Loan Facility;

• $23.5 million owed to Javelin Global under various prepetition agreements between the parties;

• $12.7 million in intercompany receivables owed to Murray Energy and other affiliates; and

• $43 million in outstanding trade payables.

Disclosure St. at 26.

F. The RSA

The day before the Petition Date, the Debtors entered into a Restructuring Support Agreement (the "RSA") with the Prepetition Term Loan Lenders, Murray Energy, Murray Met Properties, Javelin Investments and Javelin Global (collectively, the "Restructuring Support Parties"). Id. at 2. By entering into the RSA, the Restructuring Support Parties agreed to implement a multi-element restructuring transaction, which is defined in the RSA and referred to in many filings in this case simply as "the Restructuring." Id. The elements of the Restructuring include:

• The Maple Eagle Sale —The Debtors agreed to seek authority to sell substantially all of the assets of Debtor Murray Maple Eagle Coal, LLC ("Murray Maple Eagle").

• The Murray Oak Grove Sale —The Restructuring Support Parties agreed to propose the sale of all or substantially all of the assets of Murray Oak Grove (the "Oak Grove Assets") through a credit bid from Hatfield Metallurgical Holdings LLC ("Hatfield"), a newly-formed joint venture between MC Southwork and Murray Energy, subject to an overbid and auction process.

• Reclamation Obligations —Murray Energy (or its designee) agreed to assume liability for reclamation activities at the properties owned by Debtor Murray Alabama Minerals, LLC—specifically, the North River Mine, the Kellerman Prep Plant, and Mine #3. Id . at 2, 42.

G. Significant Events in the Chapter 11 Cases

1. DIP Financing

On the Petition Date, the Debtors filed a number of first day motions and applications. The Debtors had urgent liquidity needs and, without postpetition financing, would not have been able to continue operating. Id. at 32–33. Thus, in addition to the other forms of first day relief they sought, the Debtors filed a motion requesting approval of debtor in possession financing (the "DIP Financing Motion") (Doc. 44).

By the DIP Financing Motion, the Debtors sought approval of DIP facilities in the aggregate amount of $68.6 million (the "DIP Facilities"). DIP Financing Mot. at 1–3. The DIP Facilities included (a) a First-Out Senior DIP Facility (the "Senior DIP Facility"), which, as to the loans denominated as "Senior DIP Loans," was in an aggregate principal amount not to exceed $50.4 million and was comprised of (i) $28.9 million of new money term loans provided by MC Southwork and (ii) approximately $21.5 million of "rolled" prepetition first-out term loan obligations incurred under the Bridge Loan Facility, and (b) upon the signing of a stalking horse purchase agreement in connection with the sale of substantially all of the assets of Murray Maple Eagle, a Last-Out Non-Priming Junior DIP Facility (the "Junior DIP Facility"), consisting of up to $18.2 million of new money term loans provided by Murray Energy. Id. The Court also approved the Debtors' entry into the "Postpetition Javelin Facility" (as defined in the DIP Financing Motion, see Doc. 44 at 36), which provided the Debtors with the cash availability needed to facilitate the ongoing purchase and sale of coal from Murray Oak Grove. Final DIP Order at 4. Under the terms of the Postpetition Javelin Facility, $5 million of the prepetition obligations arising under the "Prepayment Facility" (as defined in the DIP Financing Motion, see Doc. 44 at 23–24) were converted to postpetition obligations. Id. at 4; Disclosure St. at 33. All told, the DIP financing extended by the lenders under the DIP Facilities and Postpetition Javelin Facility (the "Murray Met DIP Lenders") provided the Debtors the cash needed to effectuate the three elements of the Restructuring envisioned by the parties to the RSA. Disclosure St. at 2–6. In return for this benefit, the Debtors made their own commitments to the Murray Met DIP Lenders: They agreed to roll up the Bridge Loan Facility, granted liens on unencumbered assets (including avoidance actions and the proceeds of avoidance actions) and paid certain fees and expenses to the Murray Met DIP Lenders. DIP Financing Mot. at 10.

The Senior DIP Facility was memorialized in a Senior Secured Super-Priority Priming Debtor-In-Possession Credit Agreement (the "Senior DIP Credit Agreement"). See Final Order Pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364, 365 and 507 (I) Authorizing Debtors to Obtain Senior Secured Priming Superpriority Postpetition Financing, (II) Authorizing Debtors to Enter into Postpetition Javelin Agreements, (III) Authorizing Use of Cash Collateral, (IV) Granting Liens and Providing Superpriority Administrative Expense Status, (V) Granting Adequate Protection, (VI) Modifying Automatic Stay, and (VII) Granting Related Relief (the "Final DIP Order") (Doc. 248) at 2–3 & Ex. A.

The Junior DIP Facility was memorialized in a Junior Secured Debtor-In-Possession Credit Agreement (the "Junior DIP Credit Agreement"). See Final DIP Order at 3–4 & Ex. B. The Court will refer to the Senior and the Junior DIP Credit Agreements collectively as the "DIP Credit Agreements."

See Final DIP Order ¶ 6(d) at 33 ("The term ‘DIP Collateral’ shall mean all assets and properties of each of the Debtors of any kind or nature whatsoever, whether tangible or intangible, real, personal or mixed, whether now owned by or owing to, or hereafter acquired by, or arising in favor of, any of the Debtors, whether prior to or after the Petition Date, whether owned or consigned by or to, or leased from or to, the Debtors, and wherever located, including, without limitation, each of the Debtors' rights, title and interests in ... all claims and causes of action arising under chapter 5 of the Bankruptcy Code (‘Avoidance Actions’), whether pursuant to federal law or applicable state law, of the Debtors or their estates, and all proceeds thereof or judgments therefrom ...."); id. ¶ 7(a) at 35 ("The Term DIP Superpriority Claims shall have recourse against each of the Debtors, on a joint and several basis, and shall be payable from and have recourse to all DIP Collateral (including Avoidance Actions and the proceeds thereof) or judgments therefrom.").

As the chart below shows, the parties later agreed to amend the Senior DIP Credit Agreement on multiple occasions, including amendments under which the Debtors obtained additional extensions of credit to finance their ongoing operations and the administration of these Chapter 11 cases.

Amendments to the DIP Credit Agreements
No.	Date	Purpose
1	4/21/20	To amend the Senior DIP Credit Agreement to adjust certain line-item variances and the timing of certain milestones
2	5/4/20	To amend the Junior DIP Credit Agreement to adjust certain line-item variances and the timing of certain milestones
3	6/2/20	To amend the Senior DIP Credit Agreement, whereby the senior Murray Met DIP Lenders committed up to an additional $11,400,000 in aggregate principal amount of First Out Senior DIP Loans
4	8/5/20	To amend the Senior DIP Credit Agreement, whereby the senior Murray Met DIP Lenders committed up to an additional $10,800,000 in aggregate principal amount of First Out Senior DIP Loans
5	8/13/20	To amend the Senior DIP Credit Agreement, whereby the maturity date of the Senior DIP Loans was changed to September 15, 2020
6	9/15/20	To amend the Senior DIP Credit Agreement, whereby the senior Murray Met DIP Lenders committed up to an additional $6,000,000 in aggregate principal amount of First Out Senior DIP Loans
7	9/30/20	To amend the Senior DIP Credit Agreement to extend the maturity date of the Senior DIP Loans to November 2, 2020
8	11/2/20	To amend the Senior DIP Credit Agreement, whereby the senior Murray Met DIP Lenders committed up to an additional $5,000,000 in aggregate principal amount of First Out Senior DIP Loans

Debtors' Motion for Entry of an Order (I) Authorizing and Approving Eighth Amendment to Senior Secured Superpriority Priming Debtor-in-Possession Credit Agreement, (II) Amending the Final DIP Order on Account of Such Amendment, and (III) Granting Related Relief (Doc. 776) at 4–7.

Based on these amendments, as of November 2, 2020, the aggregate principal amount due under the Senior DIP Agreement was $89,229,740. Id. at 7. Under the Plan, the claims arising under the Senior DIP Facility (the "Senior DIP Claims") and the Junior DIP Facility (the "Junior DIP Claims") are collectively referred to as the "DIP Claims." Plan, Art. I.A.39 at 5. And the claims held by those senior Murray Met DIP Lenders who made additional extensions of credit under the third, fourth, sixth and eighth amendments to the Senior DIP Agreement are referred to in the Plan as "First Out Senior DIP Claims." Id. , Art. I.A.62, 63 at 7. Claims held by those senior Murray Met DIP Lenders who previously had made extensions of credit under the Senior DIP Credit Agreement but did not make additional term loans under those amendments are referred to as "Last Out Senior DIP Claims." Id. , Art. I.A.94 at 10.

The additional sums borrowed in accordance with the third, fourth, sixth and eighth amendments to the Senior DIP Credit Agreement are to be deducted from the existing total commitment under the New First Lien Facility (as defined and described below). Put differently, the Debtors simply requested that funds that had already been committed and anticipated to be advanced under the New First Lien Facility be drawn prior to Debtors' emergence from Chapter 11. See Doc. 776 (Debtors' Motion for Entry of an Order (I) Authorizing and Approving Eighth Amendment to Senior Secured Superpriority Priming Debtor-in-Possession Credit Agreement (II) Amending the Final DIP Order on Account of Such Amendment, and (III) Granting Related Relief) at 8.

2. The Critical Vendor Dispute

Along with its other "first day" motions, the Debtors filed a motion seeking authority to pay the prepetition claims of certain creditors that supply them with critical goods and services (the "Critical Vendor Motion") (Doc. 8). The Critical Vendor Motion set forth the criteria the Debtors would use to assess which creditors should receive payments on their prepetition claims early in the case. The Debtors did not identify those creditors, arguing that doing so would create a "run on the bank," while eliminating any leverage the Debtors have in their negotiations with the creditors. Following the first day hearing on this and a number of other motions, the Court entered an order (Doc. 124) granting the Critical Vendor Motion on an interim basis over the objection of the UMWA Funds, a group of multi-employer plans that provide health and pension benefits to retired coal miners and their eligible dependents. Incorporating the issues they raised in their objection to interim relief (Doc. 104), the UMWA Funds later objected to the approval of the Critical Vendor Motion on a final basis (Doc. 200). The UMWA Funds did not challenge the Court's authority to approve the payment of prepetition claims of critical vendors before plan confirmation, nor did they suggest that the Debtors have no critical vendors. Instead, they insisted that the Debtors must present evidence establishing on a vendor-by-vendor basis why payment is necessary. The Court found that the evidence presented during the interim and final hearings demonstrated that the protocol proposed by the Debtors was consistent with both the text of the Bankruptcy Code and its twin goals of promoting a successful reorganization and maximizing the value of the bankruptcy estate. The Court accordingly issued an opinion and order granting the Critical Vendor Motion on a final basis (the "Critical Vendor Decision") (Doc. 270) and explaining its rationale for overruling the UMWA Funds' objection. SeeIn re Murray Metallurgical Coal Holdings, LLC , 613 B.R. 442 (Bankr. S.D. Ohio 2020).

The UMWA Funds have appealed the Critical Vendor Decision, and the appeal is fully briefed and pending before the District Court. The UMWA Funds have not sought a stay of the Court's interim or final orders granting the Critical Vendor Motion.

3. Appointment of the Committee

Shortly after the Petition Date, the UST appointed the Committee to serve as the statutory committee of unsecured creditors in the Debtors' cases. See Notice of Appointment of Official Committee of Unsecured Creditors (Doc. 166). Since its formation the Committee has actively consulted with the Debtors regarding the administration of the estate. Disclosure St. at 36.

4. The Maple Eagle Sale

After the Court entered an order (Doc. 245) approving the bidding procedures governing the sale of all or substantially all of the assets of Murray Maple Eagle (the "Maple Eagle Sale"), the Debtors scheduled an auction on March 24, 2020. Id. at 3. Because the Debtors failed to receive any qualified bids—other than the stalking horse bid of Panther Creek Mining LLC—prior to the bidding deadline established by the Maple Eagle bidding procedures, they filed a notice cancelling the auction scheduled for March 24, 2020 and designating Panther Creek as the successful bidder. Id. The Court entered an order (Doc. 326) approving the sale of the Maple Eagle Mine to Panther Creek on April 1, 2020.

5. The Oak Grove Sale

The sale of the Oak Grove Assets through the Plan (the "Oak Grove Sale") is a central element of the Restructuring described in the RSA. Disclosure St. at 9–10. The Restructuring Support Parties contemplated that the Oak Grove Sale would involve a stalking horse purchase agreement and an auction (the "Auction") at which qualified bidders could make higher, or otherwise better, offers for the Oak Grove Assets. Id. To achieve this objective, MC Southwork and Murray Energy formed Hatfield, a joint venture created for the purpose of entering into an agreement for the purchase of the Oak Grove Assets (the "Stalking Horse APA").Id. at 10. The Debtors then sought and obtained the entry of an Agreed Order (I) Approving Bidding Procedures for the Sale of Oak Grove Assets, (II) Scheduling Hearing and Objection Deadlines with Respect to the Sale, (III) Scheduling Bid Deadline and an Auction, (IV) Approving the Form and Manner of Notice Thereof, (V) Approving Contract Assumption and Assignment Procedures, and (VI) Granting Related Relief (Doc. 394) (the "Agreed Bidding Procedures Order"). Id. at 4.

The Stalking Horse APA is attached as Exhibit A to the Debtors' Plan Supplement (Doc. 573), which was admitted into evidence as Debtors' Ex. I. See Doc. 738 (Joint Stipulation in Connection with the List of Exhibits Admitted into Evidence in the Confirmation Hearing).

Before the Court entered the Agreed Bidding Procedures Order, the Debtors, with the assistance of their investment banker, Evercore Group LLC ("Evercore"), and other advisors, began a postpetition marketing process aimed at identifying possible financial or strategic buyers for the Oak Grove Assets. Id. at 10. After its entry, the Agreed Bidding Procedures Order was disseminated to those potential purchasers who had signed nondisclosure agreements and remained actively engaged in the sale process. Id.

The Agreed Bidding Procedures Order called for the Debtors to hold the Auction, with Hatfield's offer serving as the stalking horse bid (the "Stalking Horse Bid"). Id. at 10; Agreed Bidding Procedures Order at 5. While the Debtors initially scheduled the Auction for April 29, 2020, after several adjournments, it was ultimately conducted on May 5, 2020. Disclosure St. at 12. At the Auction, the Debtors announced that, in addition to Hatfield, OGM Acquisition had submitted a "qualified bid" in accordance with the auction procedures. Id . The following chart, reproduced from the Disclosure Statement, compares Hatfield's initial Stalking Horse Bid, which Hatfield enhanced at the Auction by offering additional consideration, and its final bid:

Summary of Stalking Horse Bid
INITIAL BID	ENHANCED BID
(i) [Hatfield] will credit bid (a) up to $14.7 million of its Junior DIP Obligations, and (b) up to $3.0 million of its Prepetition Term Loan Obligations (as defined in the RSA);(ii) [Hatfield] will provide additional consideration in the form of:• [A] New First Lien [Facility]—up to an aggregate principal sum of $50,258,333 will be issued in satisfaction of Senior DIP Facility Claims;• [A] New Second Lien [Facility]—up to an aggregate principal sum of $120,759,358.54 which, together with New Preferred Equity, will be issued in satisfaction of Prepetition Last Out Term Loan Claims;• New Preferred Equity—up to an aggregate principal sum of $45,000,000 which, together with [the] (Initial) New Second Lien [Facility], will be issued in satisfaction of Prepetition Last Out Term Loan Claims;• a promissory note issued by [Hatfield] in the aggregate principal amount to be determined, which will be issued in satisfaction of the Bay Point Secured Claim; and(iii) the Debtors will assume and assign to [Hatfield] or its designee certain of the Debtors' executory contracts and unexpired leases, including the Postpetition	(i) [Hatfield] will credit bid (a) up to $14.7 million of its Junior DIP Obligations, and (b) up to $3.0 million of its Prepetition Term Loan Obligations (as defined in the RSA);(ii) [Hatfield] will provide additional consideration in the form of:• [A] New First Lien [Facility] equal to the aggregate amount of cash that [Hatfield] is required to pay to the Debtors in connection with the Sale Transaction pursuant to the Stalking Horse APA;• [A] New Second Lien [Facility]—up to an aggregate principal sum of $50,258,333 will be issued in satisfaction of Senior DIP Facility Claims;• [A] New Third Lien [Facility]—up to an aggregate principal sum of $120,759,358.54 which, together with New Preferred Equity, will be issued in satisfaction of Prepetition Last Out Term Loan Claims;• New Preferred Equity—up to an aggregate principal sum of $45,000,000 which, together with [the] (Initial) New Second Lien [Facility], will be issued in satisfaction of Prepetition Last Out Term Loan Claims;• a promissory note issued by [Hatfield] in the aggregate principal amount to be determined, which will be issued in satisfaction of the Bay Point Secured Claim; and
Global Agreements and the Management Services Agreement (as modified in a manner consistent with the Restructuring Term Sheet, dated as of February 11, 2020).(iv) [Hatfield] or its designee will assume all environmental and reclamation liabilities pertaining to Oak Grove.	(iii) the Debtors will assume and assign to [Hatfield] or its designee certain of the Debtors' executory contracts and unexpired leases, including the Postpetition Javelin Global Agreements and the Management Services Agreement (as modified in a manner consistent with the Restructuring Term Sheet, dated as of February 11, 2020).(iv) [Hatfield] or its designee will assume all environmental and reclamation liabilities pertaining to Oak Grove.

Id . at 10–12. All of the changes made to the initial Stalking Horse Bid are reflected in a May 5, 2020 amendment to the Stalking Horse APA. Id. at 10.

The "New Preferred Equity" referred to in the chart above is defined in the Plan as "the preferred equity of [Hatfield], with an initial stated value of $45 million, which New Preferred Equity shall have limited voting rights and accrue a preferred return (payable semiannually in arrears) at a rate of 8.5% per annum and shall be redeemed by [Hatfield] on December 31, 2025 or such other preferred return, redemption date and other terms and conditions which shall be consistent with the RSA and otherwise reasonably acceptable to the Requisite Parties [as defined in the RSA]." Plan at Art. I.A.112 at 12.

As the chart reflects, among other enhancements made to its initial bid, Hatfield agreed to provide a New First Lien Facility in an amount "equal to the aggregate amount of cash that [Hatfield] is required to pay to the Debtors in connection with the [Oak Grove] Sale ... pursuant to the Stalking Horse APA." Id. at 11. The New First Lien Facility did not replace the New First Lien Facility that was an essential element of the initial Stalking Horse Bid. Rather, the parties agreed that Hatfield's obligations under the New First Lien Facility would constitute senior indebtedness, thus making the original New First Lien Facility the New Second Lien Facility, and the original New Second Lien Facility the New Third Lien Facility. Id . at 10 n.8. Hatfield also agreed to eliminate certain closing conditions that would have permitted Hatfield to terminate the Stalking Horse APA if (1) in Hatfield's sole discretion, it deemed the costs needed to close the transaction to be excessive, or (2) bonding arrangements did not satisfy Hatfield. Id. at 13. The Debtors also obtained a commitment from MC Southwork to fund certain exit costs up to an additional $8 million. Id. This funding will be made through the New First Lien Facility and will be in addition to existing exit financing commitments. Id. At the conclusion of the Auction, the Debtors declared that the Stalking Horse Bid made by Hatfield was the highest and best offer received for the Oak Grove Assets. Id. at 12–13; Doc. 455 (Notice of Designation of Successful Bid and Backup Bid for Oak Grove Assets).

6. The Bay Point Litigation

a. Valuation of Bay Point's Collateral

Murray Oak Grove and Bay Point entered into a prepetition agreement—denominated as the "Equipment Lease Agreement"—under which Bay Point purported to lease certain longwall shields and their affixed electronic controls (collectively, the "Shields") located at the Oak Grove Mine. As described above, the Oak Grove Mine is a longwall mining operation, which is a mechanized process in which a shearing machine moves back and forth across the face of the coal block (known as the longwall "panel"), spilling the coal sheared from the longwall panel onto a conveyor belt that carries it out of the mine. After a certain thickness of coal is removed, the hydraulically-operated Shields, which are set side by side, advance forward toward the newly exposed face, and the roof collapses behind the closed end of the Shields. The Court described the Shields in detail in the Valuation Decision.

Immediately after the Petition Date, Murray Oak Grove brought an adversary proceeding against Bay Point (the "Bay Point Adversary Proceeding"). In its complaint, Murray Oak Grove sought a judgment declaring that: (1) the Equipment Lease Agreement is in reality a disguised financing agreement; and (2) under § 506(c) of the Bankruptcy Code, the amount of Bay Point's allowed secured claim (the "Bay Point Secured Claim"), if any, should be reduced by the amount of the reasonable and necessary costs and expenses that Murray Oak Grove has incurred and will incur to preserve, maintain and dispose of the Shields. Bay Point conceded that the lease is indeed a disguised security agreement, but it asserted a counterclaim in which it requested a judgment declaring that: (1) Bay Point holds a first priority, properly perfected security interest in the collateral; and (2) because the value of the Shields is at least $13,347,231.80, plus the amount of any accrued interest, late charges, and reasonable costs, expenses and legal fees, Bay Point holds a fully secured claim by operation of § 506(a) of the Code. The parties stipulated that Bay Point has a properly perfected, first priority security interest in the Shields. The Court held a multi-day trial (conducted on June 29, June 30 and July 2, 2020) in the Bay Point Adversary Proceeding on the issue of valuation. On August 8, 2020, the Court issued the Valuation Decision, valuing the Shields at $12,682,933 and thus determining that Bay Point's claim is undersecured.

Bay Point has filed a proof of claim asserting a secured claim in excess of $13.6 million. See Claim No. 177, https://cases.primeclerk.com/MurrayMET/Home-ClaimInfo.

At the suggestion of the parties, the Court agreed at the end of the trial to defer a ruling on whether Murray Oak Grove had the right to surcharge—that is, reduce the value of—the Shields under § 506(c). Murray Oak Grove has not sought to prosecute this claim.

b. Bay Point's § 1111(b) Election

On May 12, 2020, Bay Point filed its Notice of Election of Bay Point Capital Partners II, LP under 11 U.S.C. § 1111(b) (Doc. 479), thereby seeking to be treated as a fully secured, rather than an undersecured, creditor. If Bay Point had successfully made the § 1111(b) election, it would have retained a lien on the Shields securing the full amount of its debt, notwithstanding the Court's determination that Bay Point's claim was in fact undersecured. This would have entitled Bay Point to receive payments over time equal to the full amount of its claim, but having a present value equal to the current value of the Shields. The Debtors filed a motion to strike the election, arguing that Bay Point had no right to elect treatment under § 1111(b) because (1) the Plan provided for the sale of the Shields to Hatfield and (2) § 1111(b) made the election unavailable if the collateral is "to be sold under the plan." See 11 U.S.C. § 1111(b)(1)(B)(ii). For its part, Bay Point maintained that, even though the Plan called for the sale of the Shields to Hatfield, it was nonetheless entitled to make the § 1111(b) election because it did not have the right to credit bid on its collateral without also bidding for substantially all of the assets of Murray Oak Grove. The Court granted the Debtors' motion to strike, concluding that, by entering into the Agreed Bidding Procedures Order, Bay Point had forfeited any right it otherwise had to make a credit bid for the Shields separate and apart from Murray Oak Grove's other assets. SeeIn re Murray Metallurgical Coal Holdings, LLC , 618 B.R. 825 (Bankr. S.D. Ohio 2020). And based on that forfeiture, the Court found that Bay Point also had forfeited its right to argue that it was entitled to make an § 1111(b) election due to the Debtors' purported failure to honor its credit bidding rights. Id. at 829–30.

7. Filing of the Plan and Disclosure Statement

Less than two months after the Petition Date, the Debtors filed their initial proposed Chapter 11 plan (Doc. 335), an accompanying disclosure statement (Doc. 336), and a motion for approval of the disclosure statement (Doc. 337). After the Debtor filed various revised plans (Docs. 466, 481 & 502) and disclosure statements (Docs. 468, 483 & 504), the Court held a disclosure statement hearing on May 29, 2020. That same day, the Court entered an order (Doc. 520) approving the Disclosure Statement (which had been amended to address various objections, including an objection asserted by Bay Point), establishing a deadline of June 30, 2020 to vote on the Plan and object to confirmation, and setting the hearing on confirmation of the plan (the "Confirmation Hearing") for July 8, 2020. Doc. 520 at 3–5. After multiple adjournments, the Confirmation Hearing took place on September 2 and 4, 2020. Docs. 638, 650 & 688. The Debtors filed the current version of the Plan (Doc. 691) on August 14, 2020. The only substantive change made to the Plan related to the Bay Point Secured Claim. And because the treatment afforded the Bay Point Secured Claim was more favorable than in the previous iteration of the Plan, preparation of a new disclosure statement and resolicitation of the Plan was not required. See Order Granting Debtors' Motion for Entry of an Order (1) Modifying the Debtors' Proposed Plan of Reorganization Pursuant to Bankruptcy Code Sections 1125 and 1127(A) Without Need for Further Solicitation of Votes and (II) Granting Related Relief (Doc. 731).

H. Sources of Plan Funding

The Plan provides that on its effective date (the "Effective Date"), the Debtors will consummate the Oak Grove Sale, and the assets specified in the Stalking Horse APA will be transferred to and vest in Hatfield free and clear of all liens and other interests. Plan, Art. IX.A. at 65–66. In addition, Hatfield or an affiliated entity will obtain exit financing in the form of the three new credit facilities (described in more detail in a chart in Section III.J) and will use the proceeds of the exit financing to fund distributions to creditors under the Plan.

The Plan proposes to fund distributions to creditors from the proceeds of the Oak Grove Sale, which shall include the proceeds of the New First Lien Facility, the New Second Lien Facility, the New Third Lien Facility, and the New Preferred Equity. Id. , Art. IV.C. at 34. Distributions to creditors under the Plan also will be funded by the cash proceeds from the sale of any of the Debtors' assets not acquired by Hatfield in the Oak Grove Sale and the "Wind-Down Amount," which is defined in the Plan as the "amount determined by the Debtors and acceptable to the Restructuring Support Parties, which amount shall be retained by the Debtors and used by the Plan Administrator to fund the Wind-Down in accordance with the Wind-Down Budget." See Plan, Art. I.A.189 at 20; Disclosure St. at 17.

I. The Structure of the Plan

1. Unclassified Claims

The Plan provides for full recoveries to allowed administrative and priority claims, which, in accordance with § 1123(a)(1), were not classified under the Plan and would receive any recovery if the Debtors' business was liquidated. Disclosure St. at 60–62 & Ex. B. The Plan also sets forth the manner and timing of payment of (1) allowed administrative claims, including the DIP Claims, the postpetition claims held by Javelin Global, and the fee and expense claims of retained professionals and (2) priority tax claims. Plan, Art. II at 23–27. The DIP Claims will be satisfied as follows:

• First Out Senior DIP Claims will be allowed in the total amount outstanding under the Senior DIP Facility as of the Effective Date. Id. , Art. II.D.1 at 26. Holders of First Out Senior DIP Claims will receive, in full satisfaction of their claims, notes under the New First Lien Facility in an aggregate principal amount equal to the aggregate amount of First Out Senior

DIP Claims held immediately prior to the Effective Date. Id.

• Last Out Senior DIP Claims will be allowed in the total amount outstanding under the Senior DIP Facility as of the Effective Date. Id. Holders of Last Out Senior DIP Claims will receive, in full satisfaction of their claims, notes under the New Second Lien Facility in an aggregate principal amount equal to the aggregate amount of Last Out Senior DIP Claims held immediately prior to the Effective Date. Id.

• Junior DIP Claims will be allowed in the total amount outstanding under the Junior DIP Facility as of the Effective Date. Id. Holders of Junior DIP Claims will receive, in full satisfaction of their claims, their pro rata share of notes under the New Second Lien Facility in the aggregate principal amount of $3.5 million. Id.

2. Classification and Treatment of Claims and Interests

The classification of claims and interests held against each Debtor is described in Article III of the Plan and set forth below:

Class	Claims/Interests	Status	Voting Rights
1	Other Priority Claims	Unimpaired	Deemed to Accept
2	Other Secured Claims	Unimpaired	Deemed to Accept
3	Prepetition Term Loan Claims	Impaired	Entitled to Vote
4	Bay Point Secured Claim	Impaired	Entitled to Vote
5	General Unsecured Claims	Impaired	Deemed to Reject
6	Intercompany Claims	Impaired	Deemed to Reject
7	Intercompany Interests	Impaired	Deemed to Reject
8	Section 510(b) Claims	Impaired	Deemed to Reject
9	Interests in Holdings	Impaired	Deemed to Reject

Id. , Art. III.A at 27–28.

a. Non-Voting Classes

The Plan provides for a 100% recovery for Class 1 (Other Priority Claims) and Class 2 (Other Secured Claims) by means of payment in full in cash. Id. , Art. III.B.1 & 2., at 28–29. Because Classes 1 and 2 are unimpaired within the meaning of § 1124 of the Bankruptcy Code, they are conclusively presumed to accept the Plan and thus are not entitled to vote on the Plan. 11 U.S.C. § 1126(f). Class 5 (General Unsecured Claims), Class 6 (Intercompany Claims), Class 7 (Intercompany Interests), Class 8 (Section 510(b) Claims) and Class 9 (Interests in Holdings) will receive no distribution under the Plan. Id. , Art. III.B.5–9, at 30–32. And because holders of claims or interests in those classes will receive no property under the Plan, they are conclusively presumed to reject the Plan and accordingly are not entitled to vote. 11 U.S.C. § 1126(g).b. Class 3—Prepetition Term Loan Claims

The Plan provides that the claims held by the Prepetition Term Loan Lenders (the "Prepetition Term Loan Claims"), consisting of unpaid principal and interest, shall be deemed allowed in the amount of $168,713,638.21 as of the Petition Date. Id. , Art. III.B.3, at 29. Under the Plan, each holder of an allowed Prepetition Term Loan Claim will receive a pro rata share of (i) notes under the New Third Lien Facility and (ii) New Preferred Equity. Id.

c. Class 4—Bay Point Secured Claim

Prior versions of the Plan (see Docs. 335, 466, 481 & 502) (collectively, the "Original Plan"), provided that the Bay Point Secured Claim would be allowed in the amount of $4 million if Bay Point voted to accept the Plan. But if Bay Point failed to vote to accept the Plan, then the amount of its secured claim would be determined by the Court in the Bay Point Adversary Proceeding. Doc. 502 at 29–30. And if the amount of the Bay Point Secured Claim was determined by the Court to be in excess of $4 million, then Hatfield could elect to satisfy the Bay Point Secured Claim in full by directing the Debtors to surrender the Shields to Bay Point on the Effective Date. Id. The Original Plan further provided that before the Debtors would be obligated to surrender the Shields, Bay Point would first have to pay the Debtors, in full, "the reasonable and necessary costs and expenses incurred to preserve and dispose of the Bay Point Collateral as determined by the Bankruptcy Court in accordance with Bankruptcy Code section 506(c)." Id. at 30. Under the Original Plan, if Bay Point voted to accept the Plan, then it would receive in full satisfaction of its allowed secured claim the "New Bay Point Secured Note," which had the following terms:

Each previous iteration of the Plan provided identical treatment of the Bay Point Secured Claim.

• Obligor —Hatfield;

• Interest Rate —4.25% per annum;

• Payment —quarterly installments of interest and principal;

• Amortization —principal balance will amortize at 5% per quarter; and

• Security —first priority lien against the Shields.

Id. at 11.

As discussed above, following a three-day trial in the Bay Point Adversary Proceeding, the Court determined the value of the Shields to be $12,682,933. Rather than surrender the Shields, the Debtors opted to modify the treatment of the Bay Point Secured Claim proposed in the Original Plan. And as a result of this modification, Bay Point received different—and in several ways better—treatment under the Plan than that afforded under the Original Plan:

• The principal amount of the New Bay Point Secured Note was increased from $4,000,000 to $12,682,933;

• The interest rate was increased from 4.25% to 6.25%;

• The New Bay Point Secured Note would be assignable by the holder with the consent of the obligors, which consent was not to be unreasonably withheld;

• Covenants were added to the New Bay Point Secured Note requiring (1) the Shields to be maintained and repaired at the expense of the borrower, (2) the Shields to be returned to

The borrower under the New Bay Point Secured Note is Crimson Oak Grove Resources, LLC. Murray Metallurgical Holdings, LLC and Hatfield Metallurgical Intermediate Holdings, LLC are guarantors of the New Bay Point Secured Note.

the holder of the New Bay Point Secured Note at the expense of the borrower upon any maturity caused by an uncured event of default, and (3) prepayment of the note based on an "Excess Cash Threshold;" and

• The stated maturity date was extended from February 15, 2023 to September 30, 2025.

• The fixed principal amortization was decreased from quarterly installments of 5% to 4%.

The Excess Cash Threshold provisions contained in the New Bay Point Secured Note and the New First Lien Facility loan documents trigger mandatory prepayment of the New Bay Point Secured Note, pro rata with the loans under the New First Lien Facility, if the Excess Cash Threshold is exceeded. See Second Am. Plan Suppl. (Doc. 704), Ex. B (New First Lien Facility Credit Agreement) at 11, 34; id. , Ex. J (New Bay Point Secured Note) at 4.

Plan, Art. I.A.101 at 11; Id. , III.B.4 at 29–30.

3. The Wind-Down Trust and Plan Administrator

The Plan provides for the creation of a "Wind-Down Trust" on the Effective Date. See Plan Art. IV.F.1 at 39–40. All property of the Debtors' estates that is not distributed to holders of allowed claims on the Effective Date or conveyed to Hatfield under the Stalking Horse APA will be transferred to the Wind-Down Trust. Id. Article IV.F.1 of the Plan also calls for the appointment of a "Plan Administrator," who will be charged with managing the "Wind-Down," which includes making timely distributions to beneficiaries of the Wind-Down Trust and liquidating the Debtors' estates. See id. , Art. I.A.188 at 20 & Art. IV.F.2 at 40–42. Under the Wind-Down Trust Agreement, beneficiaries of the Wind-Down Trust are defined as including only those creditors entitled to receive distributions under the Plan. Wind-Down Trust Agreement § 5.1. And anything remaining in the Wind-Down Trust after the Plan Administrator winds down the estates and makes all distributions called for by the Plan "shall be promptly transferred to [Hatfield]." Plan Art. IV.F.2 at 42.

The Wind-Down Trust Agreement is attached as Exhibit O to the Second Amended Plan Supplement (Doc. 704).

4. Treatment of Avoidance Actions

As stated above, on the Effective Date, the Oak Grove Sale will be consummated, and the Debtors will transfer the assets listed in the Stalking Horse APA to Hatfield free and clear of liens and other interests. Among the assets to be sold are the avoidance actions of Murray Oak Grove (the "Oak Grove Avoidance Actions"), which are defined as "any claim, right or cause of action of [Murray Oak Grove] arising under Chapter 5 of the Bankruptcy Code and any analogous state law claims relating to the Acquired Assets or the Business." Stalking Horse APA Art. 1.1 at 3, 2.1(t) at 23. Under the Plan, avoidance actions that belong to the estates of Debtors other than Murray Oak Grove (the "Other Avoidance Actions") will be transferred to the Wind-Down Trust. See Plan Art. IV.F.1 at 40 (calling for all property of the estates of the Debtors not distributed to holders of claims under the Plan or conveyed to Hatfield under the Stalking Horse APA to be transferred to the Wind-Down Trust); Stalking Horse APA, Art. 2.1(t) at 23 (providing for the sale of only the Avoidance Actions belonging to the estate of Murray Oak Grove). On September 2, 2020, following completion of the first day of the Confirmation Hearing and in response to the Funds Objection, Murray Oak Grove and Hatfield amended the Stalking Horse APA to provide that "to the extent any [Oak Grove] Avoidance Actions cannot be assigned under applicable law, all proceeds thereof [will be transferred to Hatfield]." See Debtors' Plan Supplement (Doc. 730), Ex. A, Amendment No. 3 to Asset Purchase Agreement, Section 2.1(t). Based on this modification of the Stalking Horse APA, any Oak Grove Avoidance Action not sold to Hatfield will constitute Wind-Down Trust Assets on the Effective Date, and proceeds of the Oak Grove Avoidance Actions will be transferred to Hatfield. See id. ; Plan, Art. IV.F.1 at 40 ("All property of the Estates not distributed to the Holders of Claims on the Effective Date, or transferred pursuant to the Sale Transaction Documents, shall be transferred to the Wind-Down Trust and managed and distributed by the Plan Administrator pursuant to the terms of the Wind-Down Trust Agreement ...."). The effect of this modification is that if the Court determines that the Oak Grove Avoidance Actions do not constitute saleable assets, then they—along with the Other Avoidance Actions—will become assets of the Wind-Down Trust. The Court entered an agreed order (Doc. 734) establishing a supplemental briefing schedule to afford the UMWA Funds and the Debtors the opportunity to brief the issues raised by the modification. Following the Confirmation Hearing, the UMWA Funds filed a supplemental brief (the "Funds Supplemental Brief") (Doc. 741), and the Debtors filed a reply (the "Debtors' Reply") (Doc. 742).

5. The Exculpation Clause

The Plan contains the following provision (the "Exculpation Clause"), which exculpates specified persons and entities from any liability for certain acts or omissions relating to these Chapter 11 cases, including liability related to the RSA and the transactions that are elements of the Restructuring discussed above:

Effective as of the Effective Date, to the fullest extent permissible under applicable law and without affecting or limiting either the Debtor Release or the Third-Party Release, and except as otherwise specifically provided in the Plan, no Exculpated Party shall have or incur, and each Exculpated Party is hereby exculpated from, any Cause of Action for any claim related to any act or omission based on the negotiation, execution, and implementation of any transactions approved by the Bankruptcy Court in the Chapter 11 Cases, including the RSA, the Sale Transaction Documentation, the Disclosure Statement, the Plan, the Plan Supplement, the Confirmation Order, or any Restructuring Transaction, contract, instrument, release, or other agreement or document contemplated by the Plan or the reliance by any Exculpated Party on the Plan or the Confirmation Order, or created or entered into in connection with the RSA, the Sale Transaction Documentation, the Disclosure Statement, or the Plan, the filing of the Chapter 11 Cases, the pursuit of Confirmation, the pursuit of Consummation, the pursuit of the Sale Transaction, the administration and implementation of the Plan, including the issuance of any securities pursuant to the Plan or the distribution of property under the Plan or any other related agreement, and the implementation of the Sale Transaction and the Restructuring Transactions contemplated by the Plan (including, for the avoidance of doubt, providing any legal opinion requested by any Entity regarding any transaction, contract, instrument, document, or other agreement contemplated

by the Plan or the reliance by any Exculpated Party on the Plan or the Confirmation Order in lieu of such legal opinion), or any other postpetition act taken or omitted to be taken in connection with or in contemplation of the restructuring of the Debtors, except for claims related to any act or omission that is determined to have constituted actual fraud, willful misconduct, or gross negligence, each solely to the extent as determined by a Final Order of a court of competent jurisdiction, but in all respects such Entities shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities pursuant to the Plan. The Exculpated Parties have, and upon completion of the Plan shall be deemed to have, participated in good faith and in compliance with the applicable laws with regard to the solicitation of votes on, and distribution of consideration pursuant to, the Plan and, therefore, are not, and on account of such distributions shall not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or such distributions made pursuant to the Plan. Notwithstanding the foregoing, the exculpation shall not release any obligation or liability of any Entity relating to the Sale Transaction Documentation, or for any post-Effective Date obligation under the Plan or any document, instrument, or agreement (including those set forth in the Plan Supplement) executed to implement the Plan.

Plan Article VIII.E at 62–63. Among others, the Exculpation Clause covers the Debtors, the Committee and its members, the Murray Met DIP Lenders, and all employees, directors, agents, professionals and affiliates of those parties (collectively, the "Exculpated Parties"). The Exculpation Clause expressly carves out claims based on actual fraud, willful misconduct or gross negligence. Id. (excepting claims "related to any act or omission that is determined to have constituted actual fraud, willful misconduct, or gross negligence").

The Plan defines "Exculpated Party" as follows:

"Exculpated Party" means collectively, and in each case solely in its capacity as such: (a) the Debtors; (b) the UCC and each of its respective members; (c) the DIP Agents; (d) the DIP Lenders; (e) Javelin Global; (f) the Prepetition Term Loan Agent; (g) the Prepetition Term Loan Lenders; (h) the Plan Administrator; (i) the Restructuring Support Parties; (j) the MEC DIP Term Lenders; and (k) with respect to each of the foregoing Entities, such Entity's current and former Affiliates, and such Entity's and its current Affiliates' directors, managers, officers, equity holders (regardless of whether such interests are held directly or indirectly), predecessors, participants, successors, assigns, subsidiaries, and each of their respective current and former equity holders, officers, directors, managers, principals, members, employees, agents, advisory board members, financial advisors, partners, attorneys, accountants, investment bankers, consultants, representatives, and other professionals, each in their capacity as such.

Plan, Art. I.A.57 at 7.

J. Exit Capital Structure

In order to emerge from bankruptcy, the Debtors must have the ability to pay their administrative and priority claims, including the DIP Claims. As already discussed, the Plan proposes to fund distributions to creditors using the proceeds of the New First Lien Facility, the New Second Lien Facility, the New Third Lien Facility, and the New Preferred Equity. And Bay Point will receive the New Bay Point Secured Note in satisfaction of its secured claim. Hatfield's post-emergence capital structure is summarized in the following chart:

	New First Lien Facility	New Second Lien Facility	New Third Lien Facility	New Bay Point Secured Note
Holder	First Out Senior DIP Claims	Last Out Senior DIP Claims & Junior DIP Claims	Prepetition Term Loan Claims¹⁸	Prepetition Bay Point Secured Claim
Principal	$60 million	$61.2 million"	$120.8 million²⁰	$12,682,933
Maturity	63 months	63 months	63 months	60 months
Interest Rate	17.5% PIK	12% cash/14.5% PIK	8.5% PIK	6.25% cash
Required Debt Service	None	None	None	Fixed quarterly installments of 4% of principal
Collateral	All assets	All assets	All assets	The Shields
Prepayment from Excess Cash Threshold	Pro rata with New Bay Point Secured Note	None until notes under the New First Lien Facility and the New Bay Point Secured Note paid in full.	None until notes under the New First Lien Facility and the New Bay Point Secured Note paid in full	Pro rata with notes under the New First Lien Facility
OtherMandatoryPrepayment²¹	Yes	None until notes under the New First Lien Facility paid in full in cash	None until notes under the New First Lien Facility paid in full in cash	None
Guarantors	Same	Same	Same	Same

[Editor's Note: The preceding image contains the references for footnotes^,^,^, ]

Holders of Prepetition Term Loan Claims also will receive the "New Preferred Equity." See supra note 10.

This amount is estimated. The aggregate principal amount of the New Second Lien Facility will equal the sum of (i) the Last Out Senior DIP Claims outstanding under the Senior DIP Credit Agreement immediately prior to the Effective Date and (ii) $3,500,000 of the obligations outstanding under the Junior DIP Credit Agreement immediately prior to the Effective Date. Disclosure St. at 14.

This amount is also estimated. The aggregate principal amount of the New Third Lien Facility will equal the sum of (i) the total amount of the Prepetition Last Out Term Loans outstanding immediately prior to the Effective Date, not including the $3 million of Prepetition Last Out Term Loans contributed by MC Southwork to the borrower (Hatfield or an affiliated entity) as part of its credit bid for the Oak Grove Assets, minus (ii) $45 million, representing the initial stated value of the New Preferred Equity interests that will be issued to the lenders holding Prepetition Last Out Term Loan claims. Disclosure St. at 12, 14.

Other mandatory prepayment includes funds from non-ordinary course asset sales, insurance proceeds, and incurrence of indebtedness. See Plan, Exs. A–C.

See Plan, Exs. A–C; Debtors' Motion for Entry of an Order (I) Modifying the Debtors' Proposed Plan of Reorganization Pursuant to Bankruptcy Code Sections 1125 and 1127(A) Without Need for Further Solicitation of Votes and (II) Granting Related Relief (the "Modification Motion") (Doc. 690) at 159–60.

K. The Confirmation Hearing

The Court entered an agreed order establishing procedures under which the Confirmation Hearing would be conducted virtually in light of the emergency caused by COVID-19 (Doc. 735). The Confirmation Hearing was held over the course of two days, concluding on September 4, 2020. Transcripts of the first and second days of the Confirmation Hearing are filed at Doc. 812 ("Transcript I") and Doc. 819 ("Transcript II"), respectively.

In support of confirmation of the Plan and in opposition to the objections asserted by the UST, the UMWA Funds and Bay Point, the Debtors filed declarations in lieu of live testimony from two witnesses: Robert D. Moore and Jeremy Matican. The declarations of Moore (the "Moore Declaration") (Doc. 705) and Matican (the "Matican Declaration") (Doc. 706) also were admitted into evidence as Debtors' Exhibits AA and AB, respectively. Tr. I at 22–23; Tr. II at 8–9. The parties also had the opportunity to elicit live cross-examination and redirect testimony from Moore and Matican. In support of its objection, Bay Point offered the live expert testimony of Franklind Lea. The Debtors also filed the Declaration of James F. Daloia of Prime Clerk Regarding the Solicitation of Votes and Tabulation of Ballots Cast on the Plan (the "Voting Declaration") (Doc. 637). The Voting Declaration, which reported the results of the Debtors' solicitation efforts, also was admitted into evidence as Debtors' Exhibit S. Tr. I at 23. According to the Voting Declaration, only holders of claims in Class 3 (Prepetition Term Loan Claims) and Class 4 (the Bay Point Secured Claim) were entitled to vote on the Plan. Voting Decl. at 3. Class 3 voted to accept the Plan, while Class 4 voted to reject it. Id. , Ex. A.

The exhibits admitted into evidence by the Court during the Confirmation Hearing fell into three categories:

(1) Exhibits offered by the Debtors and admitted without objection during their counsel's opening statement in support of confirmation of the Plan and in response to the UST Objection and the Funds Objection: Debtors' Exs. G, I, S, W, Z, AA, AC, AD, AE and AG;

(2) Exhibits submitted by the Debtors during the live testimony offered in support of confirmation of the Plan and in response to the Bay Point Objection: Debtors' Exs. A, AA, AB, CB and CD; and

(3) Exhibits submitted by Bay Point during the testimony offered in support of the Bay Point Objection: Bay Point Exs. H, K, R, S, AI, AN, AO, AR, AT, AV, AY, BC and BD.

See Doc. 738 (Joint Stipulation in Connection with the List of Exhibits Admitted into Evidence in the Confirmation Hearing). In addition, at the Debtors' request, the Court took judicial notice of Doc. 648 (Affidavit of Service attesting to service of the Debtors' Plan Supplement and Amended Plan Supplement—Docs. 573 & 616) and Doc. 726 (the proposed confirmation order submitted by Debtors). Tr. I at 24–25. And at Bay Point's request, the Court took judicial notice of Doc. 729 (Stipulation in Connection with Confirmation Hearing). Tr. II at 5–6.

L. Confirmation Testimony

1. Robert D. Moore

As stated above, the Debtors offered the Moore Declaration in lieu of his direct examination testimony. Moore also provided live testimony at the Confirmation Hearing—both during his lengthy cross-examination by Bay Point's counsel and on redirect examination.

Moore was named Chief Executive Officer of Murray Energy, Murray Met's ultimate parent, as of October 28, 2019, immediately before the commencement of the Murray Energy Debtors' bankruptcy cases. Moore Decl. ¶ 3. Prior to that, Moore served as CFO of Murray Energy. Id. He has more than 20 years of management, operations, finance and accounting experience with the Murray Energy Debtors. Id. Moore serves as vice president of four of the Debtors in this case. Id. ¶ 5. In his capacity as CEO and CFO of Murray Energy, he oversees the operations and financial activities of Murray and its affiliates, including the Debtors. Id. ¶ 4.

According to Moore, one of the Plan's primary objectives is to preserve and maximize the value of the Debtors' assets—including the Oak Grove Assets—and to "distribute all property of the Debtors' [e]states that is or becomes available for distribution, in each case, in accordance with the priorities established by the Bankruptcy Code." Id. ¶ 14. Because those aims are consonant with the policies underlying Chapter 11 of the Bankruptcy Code, Moore believes that (1) the Plan has been proposed in good faith and (2) both the Plan and the transactions it contemplates are in the best interest of the Debtors and their respective estates. Id. ¶ 41. Although the Auction for the Oak Grove Assets failed to yield sufficient value to provide a distribution to general unsecured creditors, Moore stated that they will "still benefit by having a go-forward entity with which they can conduct business." Id. Moore believes that the Committee has "publicly endorsed the Debtors' Plan" for this reason. Id.

The Moore Declaration refers to the liquidation analysis that was prepared by the Debtors and is attached as Exhibit B to the Disclosure Statement (the "Liquidation Analysis"). Id. ¶ 45. The Liquidation Analysis includes a range of expected values of the Debtors' assets in a Chapter 7 liquidation and provides an analysis of likely recoveries for creditors in that scenario. Id. Moore believes that the Liquidation Analysis accurately reflects the likely outcome of a Chapter 7 liquidation, namely that prepetition secured creditors, administrative expense claimants, priority claimants and unsecured creditors would receive no distribution on account of their claims. Id. The Plan, by contrast, calls for full payment of administrative and priority claimants and substantial recoveries for Classes 3 (Prepetition Term Loan Claims) and 4 (Bay Point Secured Claim), the impaired secured classes that voted on the Plan. Id. The remaining impaired classes—Classes 5 through 9—will receive no distribution under the Plan. Id.

In connection with the Oak Grove Sale that will be consummated through the Plan, Moore and his management team worked with Hatfield to create a five-year business plan (the "Business Plan"). Id. ¶ 21. The Business Plan contains detailed projections of (1) coal production, (2) sales, (3) capital expenditures ("CapEx"), (4) operating costs, (5) debt service payments, (6) cash flow, and (7) profits and losses (collectively, the "Hatfield Projections"). Id. ¶ 22. In addition to Moore's involvement, the Hatfield Projections were created with input from James Turner (Senior Vice President at Murray Energy), Eric Koontz (General Manager of the Oak Grove Mine), advisors to Hatfield and the Debtors' prepetition lenders, and Alvarez & Marsal North America, LLC and Evercore (the Debtors' financial advisor and investment banker, respectively). Id. ¶ 21.

The Hatfield Projections are based on an estimate of the total volume of coal that will be extracted from the Oak Grove Mine over the five-year term of the Business Plan. Id. ¶ 26. This estimate was prepared by Hatfield in consultation with a team that included Moore, Turner and Koontz. Id. Murray Oak Grove is currently engaged in longwall mining operations at Panel 20 East of the Oak Grove Mine, which are slated to continue through the spring of 2021. At the same time, development work is being undertaken in the southern part of the Oak Grove Mine, where longwall mining operations will get underway after the mining at Panel 20 East is completed. Id. ¶¶ 26–27. The Moore Declaration contains the following chart showing the coal production levels projected in the Business Plan:

	Forecast Oct–Dec 2020	Forecast 2021	Forecast 2022	Forecast 2023	Forecast 2024	Forecast Jan–Nov 2025
Tons Produced	445,667	2,395,432	2,260,282	2,238,465	2,094,499	1,649,781

Id. ¶ 27. Moore described these projected production estimates as "conservative and achievable." Id. ¶ 25.

The sales volumes assumed in the Business Plan anticipate that Hatfield—like Murray Oak Grove—will sell all of the coal it produces through a continued relationship with Javelin Global. Id. ¶ 28. Moore stated that because all the coal produced at the Oak Grove Mine is sold directly and exclusively to Javelin Global, the Business Plan's revenue projections "are significantly insulated from market concerns that might otherwise be present, since sales to Javelin Global are not dependent on [Hatfield's] own ability to continually source and identify customers, negotiate pricing, or generate constant demand from new or existing customers." Id.

The pricing assumptions contained in the Business Plan are based on forecasts of future metallurgical coal prices derived from a variety of public and subscription-based sources, including S&P Ratings, S&P Market Intelligence, Moody's, Wood Mackenzie, and the Platts Australian Coking Coal Forward Curve. Id. ¶ 32. Hatfield, in collaboration with the Debtors' management team and Evercore, compared the forecasts from these sources to come up with its own projection of metallurgical coal prices over the five-year term of the Business Plan. Id. The following chart shows Hatfield's pricing assumptions as well as the projections from the sources that were consulted in creating both the Business Plan and the Hatfield Projections:

	2020	2021	2022	2023	2024	2025
S&P Ratings	$130	$160	$160
S&P Market Intelligence	$151	$147	$149	$149	$151	$154
Forward Curve (Platts Australian Coking Coal Low Vol)	$120	$133	$136	$135
Moody's	$110	$125
Wood Mackenzie	$137	$156	$149	$137	$143	$145
Selected Broker Reports - Average²²	$134	$143	$147	$148	$152	$155
Selected Broker Reports - 25th Percentile	$129	$136	$145	$148	$150	$153
Murray Met Financial Projection	$125	$134	$135	$145	$145	$145

[Editor's Note: The preceding image contains the reference for footnote ]

The selected brokers include Credit Suisse–Hard Coking Coal, BMO Capital Markets, Deutsche Bank, Canaccord Genuity, Scotiabank, Barclays, Morgan Stanley, CIBC, RBC Capital Markets and TD Securities. Seeid . ¶ 32 n.6.

Id. ¶ 32. According to Moore, the pricing assumptions contained in the Business Plan "are well within the range of the projections from the sources that were consulted and are generally lower than most of them." Id. ¶ 33.

"The Business Plan also contains projections of operating disbursements related to payroll, supplies, overhead, selling, general, and administration costs." Id. ¶ 34. The projections are based on Murray Met's past operational experience at the Oak Grove Mine, as well as Moore and his management team's experience operating other longwall mines owned by the Murray Energy Debtors "as applied to the requirements under the mine plan for [the] Oak Grove [Mine], as well as the Debtors' mine plan and historical run rate of costs." Id. Moore noted that the Business Plan envisions a higher level of manpower due to the simultaneous operation of both the longwall equipment and three continuous miner units at the Oak Grove Mine. Id. And higher operating costs are projected in 2023 due to the cost of subsidence, which occurs when underground mining damages surface land or property owned by third parties, thereby triggering the obligation to restore "and/or settle[ ] and release ... the damaged property." Id. & n.7. The following overhead, payroll, supply and other operating cost projections are incorporated into the Business Plan:

	2020 (Oct–Dec)	2021	2022	2023	2024	2025 (Jan–Nov)
Projected Operating Disbursements ($ in millions)	$36.2	$165.4	$163.7	$180.6	$155.3	$131.0

Id.

The Business Plan calls for CapEx outlays of $130.9 million through November 2025. Id. ¶ 35. The following chart contains a year-by-year breakdown of these projected expenditures:

	2020 (Oct–Dec)	2021	2022	2023	2024	2025 (Jan–Nov)
Projected CapEx ($ in millions)	$12.0	$39.6	$38.1	$17.2	$12.3	$11.7

Id. The bulk of the CapEx is earmarked for development of the southern part of the Oak Grove Mine and will be made to renovate existing structures, purchase new equipment, construct mine shafts, and maintain and repair existing equipment and facilities. Id.

The Moore Declaration also sets forth the projections of earnings before interest, taxes, depreciation and amortization ("EBITDA") and cash flow contained in the Business Plan. Id. ¶ 37–38. As for EBITDA, the Moore Declaration states: "The Business Plan projects positive EBITDA performance over the next five years, including positive EBITDA in the fourth quarter of 2020, and EBITDA of $38 million in 2021, $36.7 million in 2022, $34.3 million in 2023, $47 million in 2024, and $28.4 million through November 2025." Id. ¶ 37. And with regard to cash flow, the Business Plan projects that "[Hatfield] will be in a strong cash position by 2023 at the latest." Id. ¶ 38. According to Moore, this should allow Hatfield "to begin making Excess Cash Threshold payments in the first half of 2024." Id. Indeed, he stated that, notwithstanding the substantial CapEx and other cash outlays over the next two years, "the Business Plan projects that, beginning in December 2023, cash on hand (and equivalents) will be above $20 million during each remaining year." Id. Based on these projections, Moore believes that Hatfield will have the liquidity required to service its debt service obligations, including all payments called for under the New Bay Point Secured Note. Id.

The Excess Cash Threshold provisions contained in the New Bay Point Secured Note and the New First, Second and Third Lien Facility loan documents trigger mandatory prepayment of those obligations if cash and cash equivalents on hand exceed certain levels. See Second Am. Plan Suppl. (Doc. 704), Exs. B, C, D and J.

Overall, Moore opined that "the assumptions and projections contained in the Business Plan are reasonable and achievable, and that the Business Plan is likely to succeed." Id. ¶ 24. He added that: (1) "[Hatfield] is likely to hit its production and revenue targets, which are based on conservative and achievable projections," and (2) "the projected revenue and expenses will result in [Hatfield] achieving and maintaining strong EBITDA and cash positions, putting the company in a position for longterm success." Id. ¶ 25.

The Hatfield Projections are incorporated into two documents—(1) Hatfield's Unaudited Projected Income Statement and (2) Hatfield's Unaudited Projected Statement of Cash Flows—that are attached to the Modification Motion and set forth below.

Hatfield Unaudited Projected Income Statement

Javelin Funding	$ 37.3	203.4	200.3	214.9	202.3	159.4
	Forecast [$ in millions]
	2020²⁴	2021	2022	2023	2024	2025²⁵
Tons Produced	445,667	2,395,432	2,260,282	2,238,465	2,094,499	1,649,781
Tons Sold	464,141	2,395,432	2,260,282	2,238,465	2,094,499	1,649,781
MET Benchmark Index	$113.55	$121.83	$122.92	$131.54	$131.54	$131.54
Operating Disbursements
Payroll Costs	$ 11.4	47.6	43.9	41.8	39.8	33.8
Supply Costs	13.4	69.6	75.5	93.9	72.2	60.9
Overhead Costs	11.1	46.9	43.0	43.7	42.0	35.1
Selling, General & Administration	0.4	1.7	1.7	1.7	1.7	1.6
ARO Accrual	(0.1)	(0.5)	(0.5)	(0.5)	(0.5)	(0.4)
Total Operating Disbursements	36.2	165.4	163.7	180.6	155.3	131.0
EBITDA	$ 1.1	38.0	36.7	34.3	47.0	28.4

[Editor's Note: The preceding image contains the references for footnotes^, ]

In this and the next chart, the year 2020 reflects October through December.

In this and the next chart, the year 2025 reflects January through November.

Hatfield Unaudited Projected Statement of Cash Flows

Net Operating Cash Flow	$ (11.1)	(1.6)	(1.5)	17.1	34.8	16.8
	Forecast [$ in millions]
	2020	2021	2022	2023	2024	2025
Cash Flow
EBITDA	$ 1.1	38.0	36.7	34.3	47.0	28.4
CapEx	(12.0)	(39.6)	(38.1)	(17.2)	(12.3)	(11.7)
Surety Bond Cash Collateralization	(1.4)	-	-	-	-	-
Prepetition Relief	(0.3)	-	-	-	-	-
True-Up to Historical Actuals	1.6	-	-	-	-	-
New Bay Point Secured Note Amortization	(0.7)	(2.8)	(2.6)	(2.5)	(2.3)	(2.7)
New Bay Point Secured Note ECT Prepayment	-	-	-	-	(1.2)	(0.2)
New First Lien Facility Draw	10.8	12.2	-	-	-	-
New First Lien Facility ECT Prepayment	-	-	-	-	(28.1)	(14.1)
Management Fee Paydown	-	-	-	-	(2.5)	(1.5)
Total Financing Cash Flow	$ 10.1	9.5	(2.6)	(2.5)	(34.1)	(18.5)
Net Cash Flow After Financing	$ (1.0)	7.9	(4.1)	14.6	0.7	(1.8)
Cash and Cash Equivalents	$ 3.0	10.9	6.8	21.4	22.1	20.3

Modification Motion, Ex. D (Supplemental Disclosure Regarding Joint Chapter 11 Plan of Murray Metallurgical Coal Holdings, LLC and Its Debtor Affiliates), Ex. 1 (Five-Year Financial Projections).

At the Confirmation Hearing, Moore was cross-examined at length by Bay Point's counsel. Much of that cross-examination was focused on eliciting testimony from Moore as to the risks inherent in Hatfield's Business Plan. Moore testified that he and his Murray Energy management team had prepared a detailed business plan for the Oak Grove Mine at the time of the Mission Acquisition. Tr. I at 64–65. And like the Hatfield Projections, those projections (the "Acquisition Projections") included estimates of revenue based on the forecasted price of metallurgical coal as well as detailed projections of operating costs, CapEx, cash flow and EBITDA. Id. at 65. Moore admitted that the Acquisition Projections indicated that the buyer, Murray Met, would generate sufficient cash flow over the five-year forecast to satisfy all of its obligations. Id. at 65–66. Moore also stated that he found the assumptions underlying the Acquisition Projections to be reasonable and that, at the time, he was optimistic about the prospects of the Oak Grove Mine going forward. Id. at 66.

Yet despite his optimism at the time the Mission Acquisition was completed in April 2019, Moore conceded that Murray Met suspended operations at the Oak Grove Mine just over six months later in November 2019, and sought Chapter 11 protection in February 2020, less than a year after the Oak Grove assets were acquired. Id. at 66. According to Moore, Murray Met's rapid financial deterioration was attributable to "a significant decline in realizations for the [metallurgical coal] that we produce out of the Oak Grove Mine," which, in turn, resulted in the need to "suspend operations to preserve liquidity and evaluate options." Id. at 67. Moore explained:

[T]here were ongoing negotiations between the U.S. and China as it relates to trade. I believe that that had an influence as it relates to pricing overall and just overall economic activity globally, and as a result we saw a decline in the demand for the product that we produce out of the Oak Grove Mine. The result of that was a pretty significant drop in realizations from levels that were at the time of the acquisition around $200 per metric ton in the vessel, down to as low as around $100 per ton in the vessel, for the same product, just a few months following the completion of the acquisition.

Id. at 67–68. Faced with this precipitous drop in the price of metallurgical coal, Moore and his management team consulted with the Prepetition Term Loan Lenders and their advisors to "evaluat[e] any and all options as it relates to the future of the Oak Grove Mine." Id. at 68. These options included: (1) "sealing off temporarily the north area of the mine," (2) "sealing off permanently the north area of the mine," (3) "sealing off completely the entire mine," and (4) "holding the mine on hot idle for a period of time to allow market conditions to evolve, to make a determination as to whether or not it was feasible to resume mining activities in any area of the mine." Id. at 69; Bay Point Ex. R. Moore agreed that under three of these four scenarios—that is, in each option considered other than the "hot idle" scenario—Bay Point's collateral (the Shields) would have been left in their underground location and effectively abandoned. Id. at 71–72.

Moore acknowledged that in April or May of this year the Debtors violated certain financial covenants contained in the DIP Credit Agreements. Id. at 73–74. At that time, although the Murray Met DIP Lenders took no action other than issuing a notice of the default, "the Debtors and the lenders engage[d] in discussions regarding future operations at Oak Grove," and various options were considered. Id. at 74. One of the options that the parties discussed involved the cessation of operations at the Oak Grove Mine after mining at Panel 19 East had been completed. Id. at 74–75. Moore testified that, after considering a variety of scenarios, "in the early to mid-June time frame, [the parties] started to coalesce around a plan to go forward." Id. at 75. And those discussions culminated in the parties agreeing to complete the Oak Grove Sale and move forward with confirmation of the Plan. Id. at 101.

Bay Point's counsel also cross-examined Moore about the estimated cost of extracting the Shields from the Oak Grove Mine and bringing them to the surface. Id. at 75. Moore testified that while "[t]he cost is going to vary, depending on the actual location of the ... [S]hields," it would range from $2–$4 million. Id. at 75–76.

Moore also was questioned about his involvement in negotiating the RSA, and specifically the terms and conditions of the Debtors' exit financing. Id. Moore testified that the parties agreed that interest accruing on the New First, Second and Third Lien Facilities may be paid in kind at the borrower's option, which is commonly referred to as "PIK interest." Bay Point Ex. S. Given liquidity concerns, Moore "believed that there needed to be a paid in kind component at [Hatfield's] option." Tr. I at 79. He explained that the PIK option "was important to us, considering the challenges that we were faced with." Id. When he was asked about the terms and conditions of the New First and Second Lien Facilities, Moore testified that he found them fair and reasonable "[c]onsidering the circumstances of the business and the intent of getting this business through a bankruptcy process, and out of a bankruptcy process, and keeping people employed." Id. at 79–80.

On further cross-examination, Moore acknowledged that the entire amount of the New Second and Third Lien Facilities (including accrued PIK interest) will remain unpaid at maturity. Id. at 85. As for the New First Lien Facility, Moore stated:

I believe there is an excess cash flow sweep that is applied ... in the final year, maybe [20]24 and [20]25, where we pay down approximately [$]20 to $25 million. I'm not sure what the balance is, when you factor in the—the accrued and unpaid interest. I know that there is a sweep that is projected in around the [$]25 million, so it would be the face amount of approximately [$]68 [million], plus the accrued and unpaid interest, less that roughly [$]20 to $25 million.

Id. at 85–86. Having conceded that Hatfield will not be able to fully repay the indebtedness due under the New First, Second and Third Lien Facilities at maturity, Moore described the range of options available to Hatfield when these loans mature in 2025:

[A]ssuming that we are achieving our business plan, we would hope that we would be able to either refinance the facilities in their entirety. We may be able to extend those same facilities, with the existing lending group. We may look to sell the asset as a means by which to repay the facilities. And assuming that none of those alternatives would be successful, I guess that we would have to ultimately evaluate another bankruptcy proceeding.

Id. at 86.

Bay Point's counsel also questioned Moore about how the Debtors arrived at the 6.25% interest rate that will be paid on the New Bay Point Secured Note under the Plan. Moore responded that they did so based upon his conversations with their legal and financial advisors. Id. at 87. According to Moore, after the Court issued the Valuation Decision, "we increased the proposed rate under the Bay Point facility from, I believe it was four and a quarter percent, to the six and a quarter percent." Id. He testified that the increase was based on advice from the Debtors' advisors "that the prime rate, plus ... three percent, was the appropriate rate, and that's how we established the six and a quarter percent [rate]." Id. Explaining why, in setting the interest rate on the New Bay Point Secured Note, he did not personally undertake an analysis of the risk of default under the Plan, Moore stated: "I'm not sure what all gets factored into the rate above the prime rate. From my perspective I was advised that that was the maximum rate." Id. Having testified that he simply agreed to offer Bay Point what he understood to be the maximum available rate, Moore readily admitted that he did not personally take into account either "the fact that this [case] is the second bankruptcy for the Oak Grove Mine in less than two years" or "the fact that the costs that would be incurred in extracting the [S]hields from the [Oak Grove Mine] in the event of default could amount to $4 million." Id. at 87–88.

Moore was also cross-examined about the Hatfield Projections. He testified that the current version of the Hatfield Projections is based on a lower benchmark price of metallurgical coal for 2021 and 2022 than the price used in preparing an earlier set of projections that had been submitted with the Disclosure Statement. Id. at 88. Moore attributed the reduction in the projected price for metallurgical coal in 2021 and 2022 to the COVID-19 pandemic and the resulting downturn in the global economy. Id. at 89. He explained that "China acts as a large driver relative to metallurgical coal prices. And while their country continues to produce a tremendous amount of steel, it has not moved the forward[ price estimates] back up to the levels that it was at the time of our original submittal [of the Disclosure Statement]." Id. Moore also stated that the fallout from COVID-19 is "something that is working through the market, that concern relative to ... just how long we may continue to deal with that as a people, globally." Id.

Bay Point's counsel challenged Moore about the statement in his declaration that the revenue projections in the Business Plan are largely insulated from market concerns because Hatfield will be making all coal sales to Javelin Global and, thus, will not have to continually source and identify customers. Id. at 92. Moore acknowledged that Hatfield's future sales will be dependent on Javelin Global's success in sourcing and identifying customers and that Javelin Global "faces all of the same pressures with respect to the sale of met coal that anyone else who is trying to sell met coal faces." Id. at 93.

On redirect examination, Moore was asked to clarify why, from his perspective, he found the terms of the New First Lien Facility and the New Second Lien Facility to be fair and reasonable. He responded:

[W]e wanted to make certain that we had a facility from which to operate under. We found it to be important to have flexibility with respect to cash pay and paid in kind interest. We believe that the exit facility was critical, given some of the challenges that not just our company was facing at that time at Oak Grove, but globally what the world was dealing with. We believe that that certainty on an exit facility was important. And from my perspective, preserving the operation as a going concern made this entire negotiation and ultimate conclusion of that negotiation and what was the then first lien rate—or first lien term loan facility reasonable.

Id. at 94–95. Moore added that, in negotiating some flexibility in the terms of the exit facilities, he had accomplished what he had set out to achieve. Id. at 95. Moore also pointed out that, as between the New Bay Point Secured Note and the holders of New First Lien Facility, New Second Lien Facility and New Third Lien Facility notes, only the New Bay Point Secured Note will receive current cash payments of interest and fixed quarterly principal amortization. Id. at 95–96.

When asked about the projected balance of the New Bay Point Secured Note at maturity in 2025, Moore testified that, "with the assumption of the excess cash flow sweep, [that will be shared] on a pro rata basis [with the New First Lien Facility], I believe that the balance would be somewhere between [$]1.5 and $2 million." Id. at 97. In addition, Moore testified that when Hatfield modified the New Bay Point Secured Note to provide Bay Point with the treatment currently afforded under the Plan, it obtained the agreement of the Murray Met DIP Lenders and Prepetition Term Loan Lenders to "push[ out the maturity, such that the Bay Point facility would mature inside of the other maturity dates, on ... [the New First, Second and Third Lien Facility]." Id. Responding to questions from Debtors' counsel regarding modifications to the New Bay Point Secured Note that were made to address the Bay Point Objection, Moore pointed out that two covenants were added to the note: (1) a maintenance covenant "that provided that [Hatfield] ha[s] to maintain the equipment in good operating condition," and (2) "another covenant requiring [Hatfield] to recover and return the [Shields] to Bay Point at our cost." Id. at 99. In addition, Hatfield modified the New Bay Point Secured Note so that the obligors on it and the New First Lien Facility, New Second Lien Facility and New Third Lien Facility "mirrored one another," and "provided for ... Bay Point's ability, to assign the facility, subject to reasonable consent." Id.

On redirect examination Moore explained why he believed the Hatfield Projections to be better informed than the Acquisition Projections:

[L]eading up to the acquisition in April of 2019, the company performed diligence. We visited the mine, but there's no substitute for actually physically being on the ground, operating the mine, for some period of time. We've been able to employ our best practices and procedures. We have been able to debottle the mine in certain respects as a result of capital that has been spent. We've been able to improve the slope belt capacity by putting on a dewatering system. We've been able to plug in some of our own people that have come from other parts of the organization at the Oak Grove Mine. And generally speaking, just have a better handle today on the operation than we did at the time of acquisition. And that, I would say, is inherent in any type of situation where you move from a diligence and an acquisition phase into an ownership and an operating phase.

Id. at 100–01. Further, Moore stated that following the covenant default under the DIP Credit Agreement, the Murray Met DIP Lenders and Prepetition Term Loan Lenders came together around the Business Plan and committed additional capital to support it: "[T]hat was done through the [New First Lien Facility]. And just given some of the actual delays that we've encountered through the process, there have actually been advances under that facility, to date, I think [$]20, $22 million, out of the [$]60 [million] that had originally been contemplated ...." Id. at 101.

On recross-examination, Moore was asked by Bay Point's counsel how Hatfield would have the financial ability to comply with its obligation to extract the Shields from the Oak Grove Mine and deliver them to Bay Point in the event of a default under the New Bay Point Secured Note. And Moore conceded that Hatfield will not be able to do so without assistance from its lenders:

Q If you weren't able to make the quarterly cash interest payment and the principal amortization payment, where would you get the cash to cover the $4 million in cost to bring the shields to the surface?

A We would likely have to work with someone, one of the existing lenders, or if ... there were no capital dollars available or no cash available, then we would have an issue.

Id. at 104. Finally, when he was pressed about the economic risks the metallurgical coal industry faces, Moore testified:

Q [W]ould you agree though that you still face, as does everyone in the met coal industry face, a great deal of uncertainty in terms of economic conditions; is that a fair statement?

A I think if you consider where we are today relative to coal sales prices for the product that we produce out of Oak

Grove, you could argue that there may be additional downside, but I believe that—I'm optimistic, I believe, that there is actually more room for improvement than there is for decline. And I believe that from a cost basis we have done a good job of getting our arms around the mine, getting the costs down to a level that allows the operation to be viable, even in a period of additional decline.

I think that it's probably, if not the lowest cost longwall metallurgical mining operation in the country today, it's got to be right there. The only other one I think would even come close would be the Leer Mine. And the quality, I would argue, out of Oak Grove is better. So I believe that our prospects are better than they are worse, as we sit here today, but I cannot—I cannot disagree that there's always inherent risks, so that is a fair statement.

Id. at 104–05.

2. Franklind Lea

In support of its objection to confirmation of the Plan, Bay Point offered Lea as its expert witness. Lea was questioned at length on direct and cross-examination about his application of the prime-plus formula adopted by a plurality of the Supreme Court in Till v. SCS Credit Corp. , 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004). Lea applied this formula to arrive at his opinion regarding the interest rate required to compensate Bay Point for the risk of a future default by Hatfield on the New Bay Point Secured Note (the "Cramdown Interest Rate").

Lea is the principal and sole employee of Tactical Financial Consulting ("Tactical"), a company that he formed in 2005 to "provide finance and real estate consulting with an emphasis on the distress space." Tr. I at 114. Lea testified that most of the consulting work he does in Chapter 11 cases "focuses around confirmation issues, cram-down interest rates, feasibility, 1111(b), that sort of thing." Id. Lea has master's degrees in business administration and real estate valuation. Id. at 114–15. After receiving his MBA degree in 1987, Lea worked as a credit analyst, line lender, and commercial lender for a regional bank in Florida. Id. While there, he received formal credit training covering finance and accounting issues, loan underwriting, credit risk analysis and loan pricing. Id. Lea left the banking industry for several years to work for two different commercial real estate appraisal companies. Id. at 119–20. In 1994, Lea accepted a position at Textron Financial as a commercial lender in its specialty lending group. Id. at 120. Lea remained at Textron until 2005, when he formed Tactical. Id. at 122. While at Textron, Lea started a group to "handle ... complicated work-outs that were coming out of [the company's] various divisions." Id. at 121. Lea is a member of several professional organizations, including the Turnaround Management Association, the American Bankruptcy Institute, and the Association of Insolvency and Restructuring Advisors. Id. at 122. He has been designated a Certified Insolvency and Restructuring Advisor. Id.

Bay Point offered Lea as an expert regarding the "risk adjustments[ ] with respect to the [New Bay Point Secured Note] under the [P]lan." Id. at 127. This prompted an objection from Debtors' counsel, who did not question Lea's "expertise with respect to corporate finance and even with respect to the factors that lenders might think about in pricing loans." Id. at 129. But Debtors' counsel objected to Lea being offered "as an expert in what the [ Till ] formula rate should be ... [because] [t]hat's a mixed question of fact and law, and ... not [an] appropriate area for expert testimony." Id. While it overruled the Debtors' objection and permitted Lea to testify, id. at 129–30, the Court made it clear that the appropriate Cramdown Interest Rate on the New Bay Point Secured Note is ultimately a legal question for judicial determination. Id. at 130.

On direct examination, Lea listed the materials he reviewed in preparing the 38-page report (the "Lea Report") that sets forth his conclusions. Lea testified that he reviewed "the [P]lan, the [D]isclosure [S]tatement, some of the objections that were filed with regards to the claims and the [P]lan confirmation, ... news and trade organization reports, news articles, ... transcripts from the valuation hearing[,] ... the [Valuation Decision], ... deposition transcripts that also related to th[e] [the valuation hearing,] ... [and] a variety of 10-Qs and 10-Ks and bankruptcy Chapter 11 plans for coal companies." Id. at 124–25. In response to a question from Bay Point's counsel regarding the "principles [he] use[d] in reaching [his] opinion," Lea testified:

A So I used some of the fundamental principles that are used by people and lenders to evaluate risk, which would be risk and reward, the principle of substitution, the principle of contribution, and the principle of absence.

Q And just briefly, what are those principles? Can you describe what those entail?

A Sure. Risk and reward is simply a matter of making a cognitive decision, if you're getting enough back from the risk you are taking. So in this context am I getting paid enough interest for the risk that I'm taking of perhaps a default.

The principle of substitution allows one to look at comparable transactions and say, this one looks like this one, and this one, and so they have these similar aspects, and they would be evaluated from a risk perspective and/or pricing perspective, the same or very similar.

The principle of contribution would say I have Transaction A and it is similar to Transaction B, except for it has this one additional element. And the principle of absence would be the reverse, which would be I have a Transaction A, it looks like Transaction B, except for Transaction B is missing this element.

Id. at 125–26.

Lea testified that, in applying the "circumstances of the estate" risk factor identified in the Till decision, he undertook an analysis "to address the circumstances of this particular Debtor as to what a lender would consider in ... deciding [whether to] mak[e] a commercial loan to that Debtor." Id. at 133. And in so doing, Lea took into account "the general economic conditions, ... the financial markets[, and] those characteristics that were unique to the Debtor, and how it interacts with the market" as well as "the actual type of loan that was involved, so whether it was a term loan or a line of credit ...." Id. Lea also testified that he looked specifically at the "longwall mining industry," stating:

[M]y understanding is that there's only about 30 longwalls in use in the country, and finding information specific to longwall financing is difficult, if not almost impossible, because th[e] financing ... of those assets is more often than not wrapped up into all[-]asset financing secured by a first lien on all the assets. And there's logic to that, because of the nature of the security, which being that it's underground and of high cost to get it back to a lender, if necessary, a lender is much more apt to want to do an all-asset filing, so that it has the benefit of additional collateral.

Id. at 134–35.

Turning to "nature of the security" risk factor identified in Till , Lea testified that he considered the fact that Bay Point's collateral (the Shields) "is mining equipment, and ... below ground, and it has an extremely high cost to remove it from the ground ... [for Bay Point] to get[ ] its money back." Id. at 140–41. Based on Moore's testimony, Lea pegged the cost of extracting the Shields at $4 million. Id. at 141. Given this, and the Shields' estimated $3–$7 million liquidation value in the event of a future default by Hatfield on the New Bay Point Secured Note, the net amount that Bay Point would realize after repossessing its collateral would range from zero to $3 million. Id. at 141–42. In view of this low—to nonexistent—net realizable value for the Shields, which he described as "a major part of [his] analysis," Lea explained why he believed a significant upward adjustment was warranted for Till 's "nature of the security" risk factor:

So from that perspective, I then compared that to the amount of the loan, which is roughly [$]13 million, and came to the conclusion that Bay Point upon a default is grossly underwater by approximately $10 million.

Furthering that, in looking at the collateral, is that the collateral they used during the [P]lan and continued to depreciate as it is used to mine ore, and that will further reduce the recovery, and what happens is that during the [P]lan—we began at a number of $3 million and even a little more—basically, Bay Point is underwater that $3 million, in very short order, I think within, depending on the speed of the mining operation, ... that could be anywhere from two to three years. And so that to a lender, that couldn't be a bigger risk, because you're essentially walking into this transaction either $10 million undersecured, or at some point unsecured for the entire amount. And being that this transaction only has the security of the [S]hields, and no other claim, there is no other element for the lender to go to to try to recover money.

And even if it was able to make the sort of normal general unsecured claim, there's a couple hundred million dollars of first, second, third liens that's ahead of it.

So that was a major element in trying to figure out what the pricing of this should be.

Id. at 142–43.

In analyzing what Cramdown Interest Rate on the New Bay Point Secured Note would be required to account for the risk of a future default by Hatfield, Lea also considered the fact that Hatfield is in the mining industry. Id. at 143. According to Lea, the fact that Hatfield will be in the mining business "affects a number of places in the risk evaluation process." Id. And that is due to the fact that Bay Point's collateral is mining equipment that Lea described as "unique" and "industry specific." He explained:

[The Shields] [are] so unique, [they] can only be used to do one thing in the whole world, and that is to be underground and mine ore, and [they] ha[ve] no other uses, that's an unbelievably high risk to a lender.

As I said, there's only approximately 30 of these longwalls in the United States that are active, and so the idea that a lender is going to take that back and be able to liquidate it efficiently without a large delay, and knowing how the pricing works on these items, it's very easy for the lender to look at this and say, wow, that's a lot of risk coming from this industry-oriented equipment.

Id. at 143–44.

Lea testified that, in forming his opinion, he also took the current economic conditions into account. In so doing, he again emphasized the risks associated with the metallurgical coal business, which he described as "a dangerous industry." Id. at 146. Lea noted that certain industry publications report that metallurgical coal "is never going to hit the 2019 [price] level again." Id. He added:

[Metallurgical coal is] a commodity, which is very dangerous in terms of pricing, because the Debtor has zero control over pricing its ... for sale items, unlike most businesses, where it can move around and change pricing strategies. This is a[n] all or nothing—you're going to take what the market gives you, and if the market declines, then the revenues decline, and the cash flow declines, and the debts can't be paid.

Id.

According to Lea, the fact that the Debtors recently considered shutting down the Oak Grove Mine also warrants a significant upward risk adjustment. He testified:

[T]hat is a nightmare for a lender to think that they're going to put their money in, and then shortly thereafter the entire operation would shut down, and there would be no cash flow to repay it.

And even more so in this instance where we have collateral that has little to no net realizable value, depending on the date that that even might occur.

So a lender would add a big premium for that possibility, if it were even willing to step into that role, because my experience is that a lender would hear that and say, no. I mean, I can't price this high enough to take the risk that I'll be in this for six months, a year, you shut down the mine, and I have a complete loss. ... You just can't price high enough to get your money back in the short time that you might experience that. So that would be a major factor, when you consider things like the probab[ility] of default and the loss given default. That calculation would be astronomical.

Id. at 147.

Lea stated that he also considered Till 's "duration and overall feasibility of the plan" risk factor. Id. at 148. Having analyzed this and the other risk factors described above, Lea was asked by Bay Point's counsel to state his overall conclusion:

Q Based on the analysis that you undertook, did you reach a conclusion as to a rate that a lender in pricing this loan secured by the collateral of the type in which Bay Point had the security interest would require in order to make the loan?

A Yes.

Q And what is your opinion as to what that rate would be?

A Fourteen and a half percent.

Id. at 149. Lea's opinion that a 14.5% Cramdown Interest Rate is necessary to compensate Bay Point for the risk of a future default by Hatfield was based on his adjustment of the risk-free base (prime) rate of 3.25% upward by a total of 11.25%. The following chart (the " Till Spreadsheet"), which is set forth at page 14 of the Lea Report, reflects the specific adjustments Lea made to arrive at his opinion:

Till Risk Factors	Adjustment	Comments
Circumstances of the Estate	2.25%
The State of Financial Markets	0.50%	Moderate Risk—Extremely strong response by the Federal Reserve and sound response from Congress have and should continue to stabilize the financial markets
Characteristics of the Debtor	1.00%	Moderate Risk—Sound management, immensely challenging industry conditions, overall declining coal industry, but mettalurgical [sic] coal has few substitutes
Risk Inherent in this Type of Loan	0.75%	Moderate Risk—Totally dependent on cash flow for full repayment, no secondary repayment source or guarantee.
Nature of the Security	4.25%
Ability of the Debtor to Attract and Retain Customer	0.75%	Moderate Risk—Low demand, but mettalurgical [sic] coal has few substitutes
Ability to Provide Utility During the Reorganization	0.50%	Low Risk—Longwall shields are the most efficient type of mining and essential to the debtor's business plan however debtor is considering use of alternative shields
Ability of the Debtor to Attract Capital Investment or Asset Purchasers	1.50%	High Risk—After substantial effort by the investment bank, only two likely purchasers evolved – one of which was the prepetition lenders. This is strongly impacted by the difficulty in recovering the collateral from underground.
Debtor's Ability to Provide Adequate Protection in the Event of Plan Failure	1.50%	High Risk—Limited cash investment, but backed by investment entity. This is impacted by the affect [sic] of the collateral being underground.
Ability to Monitor, Insure and Control Collateral	0.00%	Low Risk—Equipment is stored underground and essential for operation
Duration of the Reorganization Plan	0.50%
Length of Repayment Plan	0.50%	Moderate Risk—The length of the repayment is typical and reasonable and presents only a moderate risk. Similar t-bill rates (representing the time value of money increase cost by about 35 basis points). In the long term I anticipate these rates will increase modestly.
Feasibility of the Reorganization Plan	4.25%
Reasonableness of the Underlying Assumptions	0.00%	Low Risk—The Plan assumptions seem well reasoned and supported.
Ability to Generate Cash Flow, Attract Future Debt or Equity Capital, or Convert Assets into Cash to Satisfy the Plan	0.75%	Moderate Risk—Commodity Demand and Pricing Orientation. Largely uncontrollable
The Characteristics of the Original Loan	0.00%	Low Risk—Similar industry risks, rate of 13.4%
Risk of Post Confirmation Changes to the Debtor's Business Model	0.75%	Moderate Risk—The Debtor has already identified a potential alternative set of longwall shields to use in future sections of the mine.
The Probability of Plan Failure	0.75%	Moderate Risk—The challenge for the debtor is its general industry is declining as substitutes for steel slowly occur (e.g., plastics, nano-carbon fibers, etc.) and environmental concerns continue to increase cost of production and mining oversight.
The Rate of Collateral Depreciation	0.50%	Moderate Risk—The rate of collateral usage is likely to be similar to the rate of repayment.
The Liquidity of the Collateral Market	1.00%	Moderate Risk—Long sales period likely due to limited demand
The Administrative Expenses of Enforcement	0.50%	Moderate Risk—The amount invested into this company makes a Chapter 22 reorganization a higher likelihood compared to an outright liquidation.
Total Till Risk Adjustment	11.25%

As the Till Spreadsheet shows, of the 17 total " Till Risk Factors" he identified, Lea made an upward adjustment for 14 of the factors. In the aggregate, those adjustments resulted in what Lea described as a "Total Till Risk Adjustment" of 11.25%. Each risk adjustment shown on the chart is accompanied by one or more "Risk Comments" from Lea explaining the reason (or reasons) why he made the particular adjustment. After he stated his opinion that a 14.5% Cramdown Interest Rate was required to compensate Bay Point for the risk of a future default by Hatfield, Bay Point's counsel asked Lea to respond to various points made by Matican in a rebuttal report Matican prepared in connection with his confirmation testimony. First, Lea was asked about Matican's contention that the Till adjustments made by Lea "appear to be entirely subjective, [with] no apparent methodological basis for them." Tr. I at 149. While not directly refuting Matican's point, Lea provided a lengthy response in which he stated that he "started with those fundamental principles of risk and reward, and comparable transactions, both the ones that were in the public filings, but also from my experience over the last 30 years of knowing how these things compare and contrast." Id. at 149–50. He then pointed out that a loan secured by the Shields is a "unique financing" and that he thus could not "go to the market and specifically find 22 longwall shield pricing events, loans, and draw conclusions from that." Id. at 150. Rather, Lea testified, he "needed to go to those basic principles, examine the information [he] had before [him], and then figure it out, just like it's done in real life, every day, at a lending institution. It was not like a computer or a book, you can go to and go look it up. You have to figure this out." Id.

The Lea Report itself was not admitted into evidence. At the Confirmation Hearing, the Court sustained the Debtors' objection to the admission of Lea's expert report (Bay Point Ex. A) and excluded it as containing inadmissible hearsay. Tr. I at 220; seeEngebretsen v. Fairchild Aircraft Corp. , 21 F.3d 721, 728 (6th Cir. 1994) (holding that the district court erred in permitting the admission of testifying experts' written reports on direct examination, because Federal Rule of Evidence 702 "permits the admission of expert testimony not opinions contained in documents prepared out of court"); Ake v. Gen. Motors Corp. , 942 F. Supp. 869, 877–78 (W.D.N.Y. 1996) ("[P]laintiff's expert witness ... is scheduled to testify at trial. Nevertheless, the report is hearsay."). While the report itself was excluded, the substance of the Till Spreadsheet—including the risk factors that Lea applied and his explanatory comments—was covered at length during Lea's direct and cross-examination. The Court accordingly reproduces the chart in this opinion for ease of reference. Cf.Osborne v. Pinsonneault , No. CIV A 407CV-002-JHM, 2009 WL 1046008, at *4 (W.D. Ky. Apr. 20, 2009) (excluding written expert report as inadmissible hearsay but permitting the use of charts and summaries contained in that expert report at trial as demonstrative exhibits); Alexie v. United States , No. 3:05-CV-00297 JWS, 2009 WL 160354, *2 (D. Alaska Jan. 21, 2009) (same).

When asked by Bay Point's counsel about Matican's assertion that "there is apparent overlap between the number of the factors that [he] cited in [his] report, that in effect [he's] double counted," id. at 150–51, Lea provided the following response:

[T]hat's just not right. What I did is I said, what effect does the industry have, and I tried to place them to the categories that the Supreme Court had laid out for us. That (indiscernible) obviously affects the feasibility, but it also obviously affects the equipment price that's used, and in this instance it affects whether you would have a revolving loan or a term loan. So it affects a number of different places. So to analyze it correctly, you have to look at all those instances where the industry comes into play. Or another example would be the collateral or lack thereof. Can you sell this collateral? If you have to extract it, what do you get back? Can the borrower, if it gets in trouble, go find another lender who would lend on this type of collateral under this situation? And so in that place, and to like the nature of security, but the same thing could be said, that it

also plays into feasibility, because if a borrower gets in trouble, maybe they could go find another lender who will give them money to pay you off. A number of issues like that come up, and so you can't say okay, the industry goes on this one line and only affects this one industry. That's silly. The industry would affect a whole host of items.

Id. at 151–52.

Lea concluded his direct examination by explaining that the covenants added to the New Bay Point Secured Note that require Hatfield to maintain the Shields and return them to Bay Point in the event of a default did not factor into his risk analysis. Id. at 153–54. As for the maintenance covenant, Lea noted that the Shields—and the other equipment in use at the Oak Grove Mine—are already well maintained and that "various governmental entities" as well as "the employees who work ... with this equipment, and are in danger every day" and "their unions ... are paying attention." Id. at 153. Likewise, the addition of the covenant requiring the return of the Shields at Hatfield's expense did not lead Lea to make a reduction in the 14.5% Cramdown Interest Rate. Id. at 154. Describing this covenant as "window dressing," Lea pointed out that if, in the future, Hatfield lacked the liquidity needed to make a quarterly payment due under the New Bay Point Secured Note (each in the approximate amount of $500,000), then it most certainly also would not have the financial ability to come up with the $4 million required to bring the Shields to the surface. Id. Lea accordingly concluded that Hatfield's agreement to bear the cost of returning the Shields in the event of default "has no weight really." Id.

On cross-examination, Debtors' counsel elicited a significant concession from Lea: That he believes that the Business Plan is feasible and has a "75 percent chance of working and a 25 percent chance of default." Id. at 157. Counsel for the Debtors then asked Lea about "the three principles of lending" he relied on in making the risk adjustments detailed in the Lea Report, namely (1) risk/reward, (2) substitution, and (3) contribution/absence. Id. at 157–59. Lea testified:

Q And with respect to these three principles, do you recall ... when I was taking your deposition, I asked you whether you could point me to an authoritative treatise or article that stated that the three principles you're talking about are the three principles that someone should use to determine what an interest rate should be on a loan? Remember me asking you that question?

A Yes.

Q And you told me that you were sure that something must exist, but that you couldn't point me to something right then and there; is that fair?

A That's fair.

Id. at 157–58.

On further cross-examination, Lea was asked about the makeup of his work at Tactical:

Q So one of the things that you do through your company is expert witness—you do expert witnessing, right?

A Yes.

Q And another thing that you do through your company is what you call basic litigation consulting; is that fair?

A Yeah.

Q And this year, to the best of your recollection, a hundred percent of the work that your company has done has come from either expert witness work or litigation consulting work, correct?

A I believe what I told you is that I don't remember what carried over from the prior year and what was really happening

in the first quarter. So I didn't really have an answer for you.

Q So if you take away the beginning of the year then, a hundred percent of your work has been either litigation consulting or expert witnessing this year, right?

A Right. It's two cases, this one and the one prior to it.

Q Okay. And generally speaking, in the last few years, 80 percent of the work that you've done through your company, 80 percent of the revenue, I should have said, comes from insolvency litigation consulting or expert witness work, correct?

A That's fair.

Id. at 160–61. Lea conceded that from the time he began his career in 1987 through the time he formed Tactical, he had "not worked on a matter involving the coal industry." Id. at 161. As for the breakdown of Tactical's engagements, the Lea Report lists 16 cases in which Lea submitted an expert report and either testified at a deposition or trial, 13 of those engagements involving cases pending in bankruptcy courts. Id. at 162–63. Lea worked on behalf of creditors in 11 of these 13 cases. When asked by Debtors' counsel about his testimony in six specific bankruptcy cases listed in the Lea Report, Lea conceded that in each case he opined that a risk adjustment greater than the 1–3% range suggested by the Supreme Court in Till was warranted. Id. at 163–69; Debtors' Ex. CB.

See discussion infra at 122–39.

Lea also was cross-examined about his positive assessments of the Murray Energy and Murray Met management team contained in the Lea Report. Specifically, Lea affirmed that his report includes the following statements:

• "The parent company's [i.e. , Murray Energy's] management has over 30 years of experience operating in the coal mining industry, including substantial experience negotiating for debt and equity investments to acquire or divest[ ] ... mining operations and equipment." Id. at 174–75.

• "The management at the Murray Oak Grove Mine is well-educated, with considerable experience in mining operations and management, including substantial time operating a mine with the longwall mining equipment securing Class 4 Bay Point." Id. at 175.

• "The consortium of the Debtor, the Debtor's lenders and their advisors hold a deep understanding of the Debtor's operations, financial structure and condition, and assets and industry." Id. at 176.

• "The consortium has considerable insight into reasons for the past failure of the Debtor and the likelihood of future success of the Debtor and the nuances of assets comprising the collateral for the various creditors of the Debtor." Id.

Lea testified that his reference to "the consortium" was intended to encompass the management team of Murray Energy and Murray Met, the Debtors' lenders, and the advisors for those parties. Id. Lea acknowledged that the management team he praises in the Lea Report will be continuing on with Hatfield and "at least one of the Debtors' lenders is also going to become the equity in [Hatfield]." Id. at 176–77.

Focusing on the Till Spreadsheet contained in the Lea Report, Debtors' counsel then posed a series of questions to Lea about the methodology he used to arrive at his opinion that a 14.5% Cramdown Interest Rate is required to compensate Bay Point for the risk of a future default by Hatfield on the New Bay Point Secured Note. Lea agreed that he began with a base rate (the prime rate at the time of the Confirmation Hearing) of 3.25%, made what he referred to as "the Total Till adjustment" of 11.25%, and thus arrived at "[his] total proposed interest rate of 14.5%." Id. at 183. In doing so, he considered the 17 risk factors he identified on the Till Spreadsheet, and "either assign[ed] an increase adjustment for risk, or no increase[.]" Id. Lea conceded that while he made a 4.25% upward adjustment to the 3.25% prime rate based on the "Feasibility of the Reorganization Plan," the comment accompanying that adjustment states that "[t]he [P]lan essentially seemed well-reasoned and supported."

As already noted, Lea made an upward adjustment for 14 of 17 the "Till Risk Factors" factors he identified.

With regard to his total 4.25% upward adjustment made for the "Nature of the Security" risk factor listed in the Till Spreadsheet, Lea agreed that 1.5% of this adjustment was attributable to a subfactor that he labeled "Ability of the Debtor to Attract Capital Investment or Asset Purchases." Id. at 190. Asked to explain the adjustment he made for this subfactor and the basis for it, Lea and Debtors' counsel had the following colloquy:

Q [O]n the right-hand column you have these so-called risk comments, and there are two different comments; is that right?

Let me put it differently. You have a comment—your comments identify two different reasons for your adjustment, fair?

A They do.

Q Okay. One of those reasons is the difficulty that Evercore had in marketing the mine, right? To you, that showed there wasn't a lot of interest in attracting capital, right?

A No, my comment was more specific to that marketing, which Mr. Startin, I believe it was, testified that he not only tried to market the mine, but he also tried to market the assets, as he was in that process.

Q Thank you. I misspoke. Mr. Startin is with Evercore, so I should have used his name. But yeah, we're talking about the same thing. And then the second reason, the second reason is that—is the idea that there could be cost to recover the shields from underground, right?

A Yeah, primarily costs, sure, when you've got to get somebody physically to do it, as well, yes. It's a cost issue.

Q And you don't remember how you allocated any particular portion of that 150 basis points between those two reasons, correct?

A No, certainly not as I'm standing here now.

Q And in fact, there are no calculations in existence that would help you remember how you apportioned that 150 basis points between those two—those two reasons, right?

A I think that's right.

Id. at 190–91.

Lea also was questioned about the second subfactor under this "Nature of the Security" risk factor, which Lea referred to as "Debtor's Ability to Provide Adequate Protection in the Event of Plan Failure." In the Till Spreadsheet Lea included three explanatory Risk Comments along with this subfactor: (1) "[l]imited cash investment;" (2) "but backed by investment entity;" and (3) "strongly impacted by the affect [sic] of the collateral being underground." Id. at 191–92. Lea agreed that the second Risk Comment—the fact that Hatfield will be backed by an investment entity, namely MC Southwork, is actually "a potential risk mitigator." Id. at 193. But again, Lea was unable to explain what, if any, numerical allocation he made between these three Risk Comments in arriving at his 1.5% upward adjustment for this subfactor:

Q Mr. Lea, you can't tell us, can you, whether you made any numerical adjustment around what you ultimately landed on, 150 basis points? You can't tell us whether you made any specific numerical adjustment for the fact that an investment entity was backing the company, correct?

A I can't tell you what it is, as I stand here, no.

Id. at 193. And the same was true for the two Risk Comments accompanying the adjustment for the subfactor in the Till Spreadsheet that Lea referred to as "The Probability of Plan Failure." Id. at 196. Moreover, Lea conceded that the concerns expressed by those two Risk Comments—(1) the risk of industry decline as substitutes for steel such as plastics and nanofibers emerge and (2) the risk that environmental concerns will raise the cost of production and mine oversight—are adequately already accounted for in the Hatfield Projections. Id. at 197–98.

Debtors' counsel concluded his cross-examination by eliciting concessions from Lea on two points. The first was the subjective nature of the "Risk Comments" that Lea relied on in making the adjustments listed in the Till Spreadsheet:

Q [I]n all of your risk comments ... there's not a specific—not a single citation to market data, is there?

A Probably not.

Q This is all qualitative commentary, right?

A Yes.

Id. at 199. And the second concession related to Lea's tendency to use a given reason for an upward adjustment multiple times to magnify its impact in his risk calculus. For example, Lea acknowledged that the high cost of extracting the Shields from their underground location in an event of a default by Hatfield impacted eight of the risk adjustments he set forth in the Till Spreadsheet. Id. at 199–200. So too for the fact that Hatfield will be engaged in the coal industry, which impacted a total of nine risk adjustments made by Lea in arriving at his suggested 14.5% Cramdown Interest Rate. Id. at 200–02. Debtors' counsel hammered this point home on recross-examination when Lea was forced to admit that there was no way to determine "the ... numerical component of each one of those ... risk adjustments ... that's specifically attributable to the fact that the borrower is in the coal industry[.]" Id. at 220. Nor is it possible to determine, Lea conceded, "numerically what portion of those risk adjustments are on account of the [S]hields being underground." Id. at 218.

3. Jeremy Matican

The Debtors offered Matican's declaration in lieu of certain of his testimony on direct examination. Matican also gave live testimony on direct examination in rebuttal to Lea's testimony, on cross-examination in response to questioning posed by Bay Point's counsel, and then again on redirect examination.

Matican is a Managing Director of the Restructuring and Debt Advisory Group at Evercore, which represents both debtors and creditors. Tr. II at 10. He has approximately 18 years of restructuring experience, with 14 years as an investment banker and another four years as a turnaround and restructuring consultant. Matican Decl. ¶ 6. Over the course of his career, Matican has been involved in raising debt financing in a substantial number of restructurings across various industries. Id. ¶ 7; Tr. II at 12. Matican is a certified public accountant, and he, like Lea, has been designated a Certified Insolvency and Restructuring Advisor. Tr. II at 11. Matican testified as an "expert in debt finance, with a specialty or an emphasis on distressed lending." Tr. II at 12.

Matican was initially tasked by the Debtors with leading a marketing process at Evercore to seek proposals from third parties in an effort to raise financing for the Shields. Matican Decl. ¶ 8–9. Through the efforts of Matican and his team, they developed a list of 24 potential third-party lenders to be contacted regarding the proposed financing, and then provided those lenders with a presentation designed to solicit proposals for financing the Shields. Id. ¶ 11–12. Of those lenders, 23 expressly declined the opportunity, and the remaining lender expressed interest but failed to follow up with any proposal. Id. ¶ 16–17. Matican was later given the task of reviewing and evaluating the numerical risk adjustments set forth in Lea's report, and subsequently summarizing his findings in a report of his own. Tr. II at 13.

If this effort had been successful, Hatfield would have been able to satisfy the Bay Point Secured Claim with the proceeds of the financing. And the new lender that provided the funding required to refinance the Debtors' obligation to Bay Point would have been granted a first-priority lien on the Shields.

During the Confirmation Hearing, Matican first provided testimony regarding his examination of the nature and risk profiles of the New First, Second and Third Lien Facilities, and whether they were comparable to the New Bay Point Secured Note. Id. at 14–29. As for the New First and Second Lien Facilities, Matican made clear that these obligations are fundamentally different from the debt secured by the New Bay Point Secured Note:

[T]he [loans being satisfied by issuance of the New First and Second Lien Facilities were] essentially [for] new money, new money in the aggregate that was provided in the weeks and months leading up to a restructuring, to provide for a smooth entry into bankruptcy. There was also DIP financing. As we're all aware, the initial projections and the associated DIP financing didn't contemplate COVID and so, therefore, post-filing it was determined that additional new monies beyond the originally committed DIP were needed to fund the balance of the bankruptcy process and ensure that the Debtors could meet their administrative claims, continue to fund the business and bridge to emergence. Further to that, it was also determined that additional new money would be required to fund [Hatfield] post-emergence from bankruptcy.

So the [loans being satisfied by issuance of the New First and Second Lien Facilities] effectively provided the new money for all those financings that I've just described. The new money commitments in the aggregate are in excess of $100 million, and through emergence, including the cash needed at emergence to pay all outstanding admin claims, expenses and the like, will be over $80 million of funding, and there will be a residual 20 plus million dollars post-emergence to fund [Hatfield].

Id. at 24–25. By contrast, the New Bay Point Secured Note represents a recovery on prepetition debt, not new money provided to aid the restructuring or fund exit costs. Id. at 25–26. In this sense, the New Bay Point Secured Note is more similar to the New Third Lien Facility, which represents take-back paper on account of prepetition debt. Id. at 27. When asked on cross-examination whether a small portion of the loans being satisfied by issuance of the New Second Facility also constituted prepetition financing, Matican explained that those prepetition amounts were advanced to bridge the restructuring, as they were "invested in the days and weeks leading up to the bankruptcy filing, with the common understanding at that point in time that the company was going to file for bankruptcy, but that there was greater benefit to providing additional liquidity runway[.]" Id. at 83.

In response to questioning about his assessment of the different risk profiles for the post-confirmation obligations Hatfield is undertaking, Matican testified that the risk of nonpayment of the New First, Second and Third Lien Facilities is considerably greater than the risk of nonpayment of the New Bay Point Secured Note. Looking first at the New First Lien Facility, Matican concluded that he did not believe its risk profile was comparable to that of the New Bay Point Secured Note. Id. at 14. As to this point, Matican opined that "based upon the Debtors' forecast, there will be sufficient cash flow and liquidity to organically repay the entire [New Bay Point Secured Note], including the amount due at maturity." Id. at 24. Conversely, he observed that "[t]he collateral coverage profiles of the [New First Lien Facility and the New Bay Point Secured Note] are essentially going in opposite directions." Id. at 18. Payments on the New Bay Point Secured Note are projected to result in total amortization of between 80% to 90% of the principal amount at maturity with the Shields' estimated usage increasing by only 35%—taking the Shields' total usage to just over 50% of their useful life. Id. at 18–19. But the New First Lien Facility will accrue unpaid interest, causing "an accreting claim, without necessarily a corresponding increase in the underlying collateral" securing the loan.Id. at 19–20. In Matican's view, this difference in collateral coverage suggests that the risk of nonpayment at maturity for the New First Lien Facility is greater than that of the New Bay Point Secured Note. Id.

Doc. 729 (Stipulation Between Bay Point and the Debtors in Connection With Confirmation Hearing) ¶¶ 2–3 (stipulating that the Shields had run approximately 11,246 cycles of usage as of July 2020, and that if they continue to be used at the Oak Grove Mine, "such use will likely be in the range of 15,385 cycles to 23,100 cycles between the [Effective Date] of the [Plan] and September 2025").

Matican also described various terms of the New Bay Point Secured Note that are, in several respects, more favorable than the treatment afforded to the New First, Second and Third Lien Facilities, thereby reducing its level of risk relative to Hatfield's other post-confirmation obligations. Id. at 16–25. First, he pointed out that the New Bay Point Secured Note is entitled to fixed quarterly cash amortization payments of 4% per quarter, which results in 16% amortization of the loan balance per year, meaning that the loan would amortize by at least 80% throughout its five-year term. Id. at 16. Conversely, the New First, Second and Third Lien Facilities will not receive fixed amortization payments. Id. at 16–18 & 28. Second, he noted that if Hatfield's cash or cash equivalents exceed a certain threshold, then the New Bay Point Secured Note and loans under the New First Lien Facility are entitled to share pro rata in Excess Cash Threshold sweep payments (the "ECT Payments"). Id. at 16–17. Only after those loans are paid in full are the loans under the New Second and Third Lien Facilities entitled to share in the ECT Payments. Id. In fact, Matican observed that the Hatfield Projections currently provide that the New Bay Point Secured Note will receive ECT Payments resulting in an additional 10% of amortization, meaning that the total loan will be over 90% amortized by maturity "leaving a residual balance at maturity just north of a million dollars." Id. at 17; Hatfield Projections (Unaudited Projected Statement of Cash Flows). Loans under the New Third Lien Facility, however, are not currently projected to receive any of the ECT Payments. Tr. I at 28; Hatfield Projections (Unaudited Projected Statement of Cash Flows). Third, Matican noted that the New Bay Point Secured Note will receive cash interest payments every quarter, while the New First, Second and Third Lien Facilities will receive interest that is payable in kind . Id. at 17, 29. Regarding Bay Point's entitlement to cash interest payments as well as fixed amortization payments, Matican stated:

What's of note from my earlier testimony is Bay Point is the only creditor receiving cash interest, mandatory cash interest. They're the only creditor receiving fixed amortization. And so during the entire projection period any and all of those cash flows that are available for debt service are going first and foremost to Bay Point, with respect to its cash interest and its cash amortization. And that's one of many factors that substantially de-risks the Bay Point note that's being contemplated here.

Id. at 22–23. Finally, according to Matican, the New First, Second and Third Lien Facilities mature three months later than the New Bay Point Secured Note, which also increases the risk of nonpayment. Id. at 23–24, 28.

Given the Plan's treatment of the Bay Point Secured Claim, Matican also opined that the relative risk of nonpayment of the New Third Lien Facility is higher than that of the New Bay Point Secured Note. Id. at 27–28. Much like the loans under the New First and Second Lien Facilities, the New Third Lien Facility loans are not guaranteed cash interest payments, meaning that their outstanding balance will "continue[ ] to accrete or grow ... over the life of the loan." Id. at 29. In addition, the New Third Lien Facility sits behind the New First and Second Lien Facilities, so it will be repaid only after those loans are paid in full. Id. In Matican's view, these factors further establish that the New Third Lien Facility has a higher risk profile than that of the New Bay Point Secured Note. Id.

All told, after considering the different terms and conditions of Hatfield's post-confirmation obligations, Matican concluded that the New First, Second and Third Lien Facilities have a higher risk profile than the New Bay Point Secured Note. Id. at 14, 25–27.

Matican also testified about the opinions stated in his rebuttal report. Matican prepared his rebuttal report to counter Lea's expert testimony. And in his live testimony Matican refuted the primary reasons that Lea offers to support his conclusion that a 14.5% Cramdown Interest Rate is required to compensate Bay Point for the risk of a future default by Hatfield on the New Bay Point Secured Note. Id. at 13–14.

Like the Lea Report, Matican's rebuttal report itself was not admitted into evidence. Rather, Matican described the conclusions he reached in his rebuttal report in detail in both his direct and cross-examination.

As an initial matter, Matican expressed the opinion—also stated in his rebuttal report—that "Mr. Lea did not use a formal documented methodology" and that "[h]is adjustments were largely subjective, and not supported by underlying calculations or references to specific third-party data[ ] to support each of his underlying assumptions." Id. Matican then turned to several of the major factors that Lea considered in conducting his Till analysis. According to Matican, Lea's analysis improperly overstated the effect that the Shields' being underground had on both the risk of default on the New Bay Point Secured Note and the risk of loss of the Shields (that is, the risk of not being able to recover the Shields in the event of a default). Id. at 30. Matican conceded that he has no previous experience with a financing in which the debt was collateralized by equipment located underground. Id. at 68. But Matican testified that he did have experience with analogous financing transactions involving difficult-to-access collateral, such as oil rigs in the middle of the ocean and shipping vessels operating in foreign waters. Id. at 91–92. According to Matican, the Shields' underground location simply does not materially impact the risk of default on the New Bay Point Secured Note. Id. at 30. He stated:

When the collateral is underground and the company is using it to effectuate its business plan, the loan is effectively a performing loan. And so the risk of default really plays into the extent to which the cash flows of the company are sufficient to support the repayment obligations under the Bay Point note, both the cash interest that's mandatory, as well as the fixed amortization that's mandatory.

As long as the contemplated Bay Point note is performing, there is no risk of default tied to its collateral's location underground.

Id.

As for the risk of loss of the Shields, Matican acknowledged that there is some risk associated with the Shields being underground, but that Lea overstated the effect of such risk for two reasons. Id. at 35, 37. First, the Hatfield Projections suggest that Hatfield will be able to make timely payments on the New Bay Point Secured Note. Id. at 35–36; Hatfield Projections (Unaudited Projected Statement of Cash Flows). By Matican's reckoning, this means that a default on the New Bay Point Secured Note in the first instance is unlikely, so Bay Point's feared loss will never materialize. Id. In other words, Hatfield's adherence to the Business Plan—which the Hatfield Projections indicate is likely—will ameliorate or eliminate "the risk of extraction" and, thus, "taking back collateral and having to modify, will never come into being." Id. at 36. While Matican acknowledged that the Hatfield Projections contemplate a degree of market volatility, pricing levels are still projected to increase overall:

[I]f you look at the absolute levels of coal pricing, notwithstanding the volatility that—it's a commodity, so the pricing goes up and down, arguably, every day, and there is volatility. There has been in the past. There will be in the future. That won't change.

However, what matters here is, notwithstanding that volatility, what are the pricing levels that are projected by third parties, by the forward curve that investors and operators are buying each and every day. And notwithstanding that projected volatility, those levels of pricing are meaningfully above where we are today and are projected to remain meaningfully above where we are today. And that's what's embedded in the company's forecast and the plan that we believe is feasible and will provide for the full repayment of Bay Point, with organically-generated cash flow.

Id. at 65.

Second, even if there is a default, Matican testified that MC Southwork—an entity with a substantial equity interest in Hatfield, a holder of almost $165 million in prepetition claims, and a contributor of over $100 million in new capital—is heavily invested in ensuring that the New Bay Point Secured Note remains a performing loan. Id. at 37; see also id. at 87 ("[MC Southwork] is going to own both the preferred equity, as well as close to 50 percent of the common equity in [Hatfield], in addition to their first, second and third lien debt claims"). In the event of a potential default, Matican opined that "the parties would engage around the workout, out of court, to address the event of default, and maintain Bay Point as a performing loan, long before the default resulted in Bay Point having to take back its collateral." Id. at 37.

On cross-examination, Bay Point's counsel pointed out that Hatfield is not currently projected to have sufficient cash on hand to repay the debt under the New First Lien Facility at maturity in 2025, thereby suggesting that another bankruptcy filing may be in the company's future. Id. at 57–58. In response, Matican countered that:

[Another bankruptcy filing] is certainly possible, but I believe it's unlikely, given the facts and circumstances of the case, as we know them today, including the fact that MC Southwork has invested over a hundred million dollars in this business. They own both the debt and equity in this company, and it really doesn't benefit them to file for bankruptcy over a maturity, where they both own the equity and the debt. There are far more efficient and value-maximizing ways to address that maturity when it comes about.

....

The logical next step is to effectuate the most cost-efficient and value-maximizing extension of that debt, so that they're best positioned to continue operating the business and maximizing their recovery going forward. In that scenario, the debt would be amended and extended out of court, and the company would be able to avoid potentially expensive and value-destructive restructuring that would more adversely impact MC Southwork's recoveries, relative to the out-of-court solution that I have outlined.

Id. at 58–59. Matican also noted that the same out-of-court solution would be pursued if the New Second and Third Lien Facilities could not be repaid at maturity, pointing out that "MC Southwork has investments in the [New First, Second and Third Lien Facilities], the preferred equity and the common equity," that it "own[s] positions up and down this capital structure," and that it is "highly incented to address that maturity in the most cost-efficient manner, and to do so without the need for a bankruptcy filing." Id. at 59–60. Elaborating further, Matican explained why MC Southwork's equity position in Hatfield creates a strong incentive to work out any potential defaults on the New Bay Point Secured Note:

[The lenders for MC Southwork are] highly incented to maximize the value of the enterprise to cover not only their debt claims but their preferred and common equity in the company. As we all know ... bankruptcies are expensive and they come with a lot of risk, process-wise, value-wise. There's a greater likelihood of value destruction in bankruptcy than there is in an out-of-court solution. And, therefore, [in] my opinion, if the projections in the market don't perform as expected, notwithstanding all the embedded risks, including the very risks that [Bay Point's counsel] had me read in that paragraph, that are embedded in the projections, the next logical

step for MC Southwork is to negotiate an out-of-court resolution that would likely accrue to the benefit of Bay Point if their debt is even outstanding debt.

Id. at 87–88.

Challenging Matican's testimony that MC Southwork would have a heavy incentive to avoid a future bankruptcy filing, counsel for Bay Point asked whether the same incentives existed when MC Southwork financed the Mission Acquisition, and if so, why they were not sufficient to prevent the Debtors' bankruptcy. Id. at 60. Matican responded:

I can't speak as much to what their incentives were at the time. I wasn't involved. But I will tell you at that point in time their claim was materially lower than what it is today, and that was prior to them putting in over $100 million of fresh capital. MC Southwork and the underlying investors, they all have [limited partners] that they have to answer to. For them to put in an additional hundred plus million of capital, and have this business file for bankruptcy, even four or five years down the road, would not be a good fact pattern.

They're looking at the same projections that we are now, that demonstrate the business will not have sufficient cash to repay the [New First Lien Facility]. They're a very sophisticated organization. They wouldn't put a hundred million of fresh capital at work, if they didn't have a Plan B and a Plan C to address that maturity, if and when it occurs, and there isn't an ability to refinance it.

....

... I've never seen a situation where an investor or a group of investors would put a hundred plus million of fresh capital at work in connection with a restructuring, and the projections didn't provide for a repayment of part of that new capital, and not intend on supporting the company and have a plan to address that maturity, if and when it occurred, in a manner that didn't preserve and maximize the value of the enterprise and avoid a potentially costly and value-destructive bankruptcy.

So to say it another way, the maturity comes and there isn't sufficient cash to refinance the first lien, and the loan can't be refinanced with third-party capital, the logical next step would be for MC Southwork to do an out-of-court and then to extend, to push out that maturity, and avoid a costly and potential[ly] value-destructive bankruptcy.

Id. at 60–62; see alsoid. at 74 ("I certainly wouldn't expect sophisticated investors like MC Southwork to invest a hundred plus million dollars and allow a claim of less than—of [$]12.7 million or less to drive this company into bankruptcy or default scenario that they wouldn't attempt to work out.").

Bay Point's counsel also asked Matican whether he knew that the possibility of shutting down mining operations was considered prepetition and even as recently as May 2020. Id. at 62–63. In response, Matican testified:

I don't have direct knowledge of that, but ... I suspect that was because the COVID situation had a more dramatic negative impact than what the Debtors and MC Southwork had anticipated going into the bankruptcy, when the DIP commitments were provided. And a decision had to be made as to whether additional new money capital would be provided to maintain the going concern of the Debtors and bridge to a value-maximizing restructuring, or whether that new financing was not going to be available and, therefore, the Debtors could potentially be forced to liquidate.

As we know sitting here today, the ultimate decision by MC Southwork was to contribute significant additional capital in the midst of this case, notwithstanding the unprecedented challenges presented by COVID.

So it just further demonstrates their commitment to this business, by increasing their level of commitment and ensuring that the restructuring had ample liquidity to be consummated and also committing additional capital for [Hatfield] to fund its operations.

Id. at 63–64.

Matican also noted that the size of Bay Point's claim relative to MC Southwork's investments in the Oak Grove Mine made a future default by Hatfield—and repossession of the Shields by Bay Point—a highly improbable scenario:

[I]n the unlikely event that there is a default, I don't believe that [Hatfield] or MC Southwork would pivot directly to giving Bay Point its collateral back. I think the more likely next step would be to determine whether there's a mutually acceptable solution to rectify in the event of default and work out the situation. And if the Bay Point loan is $12.7 million, [and will] be paid down very significantly from day one of emergence, through the full five-year tenor, it's a very small fraction of the hundred plus million dollars of new money that MC Southwork has invested. It's also an even smaller fraction of the [$]250 million plus of exposure that MC Southwork has here. It's not in their interest to default on this loan over what is arguably a small claim, relative to the value of the company.

Id. at 73–74.

Further, Matican pointed out that in a default scenario MC Southwork would want to maximize the value of Hatfield by maintaining it as a going concern. Id. at 93. To do so, Hatfield would need to retain its ability to use the Shields in its mining operation, which provides yet another incentive for MC Southwork to work out the New Bay Point Secured Note to maximize the value of the business as a whole. Id. For all of these reasons, Matican estimated that the probability of a scenario occurring in which Bay Point would need to actually recover the Shields was "extremely low." Id. at 79–80. And, according to Matican, a third-party investor would take that low likelihood of occurrence into consideration in ascribing an appropriate interest rate to the New Bay Point Secured Note:

The way the creditor or the new investor would look at this, in my opinion, is based upon a going concern and performing scenario, what is the likelihood of [Hatfield], or the underlying borrower, their ability to maintain the loan as a performing loan. That's where they would start. And they would look at the company's business plan and the feasibility of that plan, and they would gauge the extent to which they believe the company would be able to achieve that plan, and meets its obligations, including those to the underlying equipment financing. That's where they would start. That's where the majority of the weight would be provided. ...

....

That's where I would expect the lending party to start with their analysis. To your point, they would also look at a scenario where not only did the borrower default, but the borrower was not able to work out a mutually acceptable solution and, therefore, the lender did have to take back its collateral to monetize it. So that is a consideration that the lender would certainly look at. I agree with you on that point. But they're going to look at those two scenarios and

they're going to apply an appropriate amount of weight to each of them.

And so as I look at this plan of reorganization, the company's business plan, it's a combinated capital structure, in the [New First, Second and Third Lien Facilities], that accrues to the benefit of Bay Point. There's a very strong likelihood that the company will avoid ... defaults and, therefore, the risk of defaults is low and quite manageable.

And if there's not an event of default, this scenario that you're very focused on will never occur. If ultimately there is an event of default, as I stated previously, my expectation is that parties will engage in a constructive dialogue to work out the loan to Bay Point's satisfaction.

If that doesn't occur out of court, and there's a bankruptcy filing, there's still a good chance that the loan gets worked out in bankruptcy, as it is here, and Bay Point will still have a path to get its money out.

If, however, that doesn't happen, and we find ourselves in a situation where Bay Point has to take back its collateral, typically a lender would look at that and they would ascribe a probability of outcome to that. And, in my opinion, the probability of that outcome is extremely low. And so while the impact on a recovery is significant to your point and, therefore, the recovery could be on the lower end of the spectrum, if that were to play out, the probability of that unfavorable outcome is low. And so the lender would ascribe the probability to the impact on recovery and, therefore, apply a lower weight to that, and the base case, where the company achieved its projections and maintains a performing loan.

Id. at 78–80.

Next, Matican testified that Lea's analysis improperly overstated the effect of Hatfield's involvement in the coal industry as a basis for an upward adjustment to the Cramdown Interest Rate on the New Bay Point Secured Note. Id. at 37. While the thermal coal market is suffering from various challenges, Matican pointed out that Hatfield's business will be selling metallurgical coal, an entirely different commodity subject to different market forces:

On cross-examination, Lea acknowledged that the fact that Hatfield is in the coal industry played a critical part in his Till analysis. Tr. I at 143–47. Indeed, it caused him to make an upward risk adjustment to 9 of the 17 risk factors employed in his analysis. Id. at 199–201.

The characterizations that I've heard from Mr. Lea are more appropriate for thermal coal, which sells the commodity to power plants. There are definitely fewer power plants now than there have been in the past. That industry is suffering from secular challenges.

However, met coal fundamentally is a completely different industry. And so it's not suffering from decline. Met coal is used to produce steel, and there will always be steel demand. It could fluctuate, but there will always be steel demand. It's not an industry in secular decline. If anything, we're living in a world where developing economies are growing and building buildings and using more steel globally. And certainly if you look at the statistics, the steel demand has been stable over the past ten years and expected to continue to be stable.

Id. at 38.

In discussing the outlook for the metallurgical coal industry, Matican referred to the metallurgical coal price forecasts from 2020 through 2025 that were used to derive the Hatfield Projections and create the Business Plan. Id. at 38–41; Moore Decl. ¶ 32. He observed that these third-party industry forecasts—created from various reports from recognized brokers, analysts and rating agencies—all "indicate a stable to growing market, and that's reflected in the stable to growing pricing that you see in the various forecasts." Tr. II at 39.

On cross-examination, Bay Point's counsel questioned Matican about the series of emails he received from some of the 24 potential third-party lenders to whom Evercore sent the proposal to finance the Shields. Specifically, Bay Point's counsel drew Matican's attention to the fact that, in declining the opportunity, several of these lenders cited the Debtors' involvement in the coal industry as a factor influencing their decision. Id. at 52–57. Indeed, one of the emails referred to coal as "a moratorium industry." Id. at 56; Bay Point Ex. BD. But on redirect examination, Matican explained that a moratorium industry is one in which lenders may be precluded from investing for various policy reasons having nothing to do with the economic risk associated with the industry:

See Bay Point Exs. AI, AN, AO, AR, AT, AV, AY, BD & BC.

Coal, whether it's metallurgical coal or thermal coal, has environmental impacts and, therefore, because of the perceived environmental impacts, some institutions choose not to lend and have a moratorium on lending to the industry, the coal industry, for that reason, whether it's met on the one hand or thermal on the other.

Id. at 90. Thus, in Matican's view, a lender's designation of an industry as a moratorium industry does not "necessarily have a connection to the risk [profile] of an industry" as "there could be social issues or environmental issues, et cetera, that would impact that decision." Id.

Finally, Matican observed that Lea's analysis overstated the effect of global financial markets, including the effect of trade wars with China and the COVID-19 pandemic, as a basis for one of the many upward risk adjustments made in his Till Spreadsheet. Id. at 42, 67. While recognizing that the metallurgical coal market is not immune from the impact that these factors have had on the economy, Matican pointed out that these considerations were already taken into account in the third-party metallurgical coal price forecasts that form the basis of the Hatfield Projections and the Business Plan. Id. at 42, 68. The remaining risk inherent in this factor, according to Matican, was further mitigated by MC Southwork's infusion of new capital to finance the Debtors' emergence and Hatfield's go-forward operations, fiscal and monetary stimulus by governments around the world in response to COVID–19, and the enduring demand for steel and, thus, for metallurgical coal. Id. at 42–43.

IV. Legal Analysis

The Court "shall confirm a plan" under § 1129(a) of the Bankruptcy Code if it satisfies all of the applicable requirements of that subsection. See 11 U.S.C. § 1129(a). One of those requirements is that "[w]ith respect to each class of claims or interests—(A) such class has accepted the plan; or (B) such class is not impaired under the plan." 11 U.S.C. § 1129(a)(8). Thus, in light of the rejection of the Plan by Class 4, an impaired class made up of Bay Point, the Plan cannot be confirmed based solely on § 1129(a). Section 1129(b), however, requires the Court to confirm the Plan if it meets the requirements of that subsection as to each impaired, non-accepting class and if the Plan satisfies the applicable requirements of § 1129(a) other than § 1129(a)(8). For the reasons explained below, the Court concludes that the Plan satisfies § 1129(b) as to Class 4 and that Bay Point's objection should be overruled. Before getting there, the Court will address the objections of the UST and the UMWA Funds and will exercise its independent duty to determine that the Plan complies with the applicable requirements of § 1129(a) other than § 1129(a)(8). See In re Trenton Ridge Invs., LLC , 461 B.R. 440, 455–59 (Bankr. S.D. Ohio 2011) ; In re Future Energy Corp. , 83 B.R. 470, 481–82 & n.21 (Bankr. S.D. Ohio 1988).

A. Section 1129(a)(1)

Section 1129(a)(1) of the Bankruptcy Code requires a Chapter 11 plan to "compl[y] with the applicable provisions of [the Code]." 11 U.S.C. § 1129(a)(1). Two objections—those of the UST and the UMWA Funds—are based on the premise that the Plan violates the Bankruptcy Code.

1. The UST Objection

The Plan includes the Exculpation Clause, a provision intended to limit the liability of estate fiduciaries and other specified parties for certain claims that may be asserted against them based on the Debtors' restructuring. As stated above, the Exculpation Clause protects the "Exculpated Parties," who include, among others, the Debtors, the Committee and its members, and the Murray Met DIP Lenders, as well as employees, directors, agents, professionals and affiliates of those parties. The Exculpation Clause contains an exception for claims based on actual fraud, willful misconduct or gross negligence.

See Plan, Art. I.4.

The UST objects to the Plan based on its inclusion of the Exculpation Clause, arguing that the provision is overly broad in two respects. First, the UST claims that the Exculpation Clause is improper "because it extends beyond fiduciaries of the Debtors' bankruptcy estates." UST Obj. at 3. Second, the UST takes issue with the temporal scope of the Exculpation Clause, contending that it may not extend to acts and omissions occurring prepetition. Id . at 5 ("Plans should generally only exculpate those actions taken in connection with a bankruptcy case between the petition date and the effective date of the plan."). The Court disagrees on both counts and accordingly overrules the UST Objection.

The Exculpation Clause is included in the Plan in accordance with § 1123(b)(6) of the Code, which provides that Chapter 11 plans may "include any ... appropriate provision not inconsistent with the applicable provisions of [the Bankruptcy Code]." 11 U.S.C. § 1123(b)(6). As the Ninth Circuit recently noted, exculpatory clauses are "a commonplace provision in Chapter 11 plans." Blixseth v. Credit Suisse , 961 F.3d 1074, 1085 (9th Cir. 2020) (quoting In re PWS Holding Corp. , 228 F.3d 224, 245 (3d Cir. 2000) ); see alsoIn re Health Diagnostic Lab., Inc. , 551 B.R. 218, 232 (Bankr. E.D. Va. 2016) (stating that "[e]xculpation provisions in chapter 11 plans are not uncommon"). And § 105(a) of the Code grants bankruptcy courts the authority to approve exculpation clauses, as it empowers a court to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [Chapter 11]." 11 U.S.C. § 105(a) ; see alsoBlixseth , 961 F.3d at 1084 (holding that bankruptcy courts have the authority under §§ 105(a) and 1123 "to approve an exculpation clause intended to trim subsequent litigation over acts taken during the bankruptcy proceedings and so to render the Plan viable").

Notably, exculpatory provisions differ from estate and third-party releases, which are also often included in Chapter 11 plans and are contained in the Plan. Estate and third-party releases provide for the relinquishment of claims held by the debtor or third parties against certain nondebtor parties; by contrast, exculpatory clauses establish the standard of care that will trigger liability in future litigation by a non-releasing party against an exculpated party for acts arising out of a debtor's restructuring. Blixseth , 961 F.3d at 1084 ("Section 524(e) ... ensur[es] that no third party is released from its obligation for the underlying debt [being discharged]. But ... the Exculpation Clause does not affect claims for that debt, and so it was within the bankruptcy court's power to approve the Exculpation Clause as a part of the Plan."); PWS Holding Corp. , 228 F.3d at 246–47 (holding that exculpation for acts committed during the process of developing and confirming a Chapter 11 plan did not "affect the liability of another entity on a debt of the debtor" and thus do not implicate § 524(e) of the Code); Health Diagnostic Lab. , 551 B.R. at 232 ("The practical effect of a proper exculpation provision is not to provide a release for any party, but to raise the standard of liability of fiduciaries for their conduct during the bankruptcy case.").

Section 524(e) of the Bankruptcy Code provides: "Except as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt." 11 U.S.C. § 524(e).

"As a policy matter, exculpations are necessary to ensure that capable, skilled individuals are willing to assist in the reorganization efforts in chapter 11 cases." In re Alpha Nat. Res., Inc. , 556 B.R. 249, 260 (Bankr. E.D. Va. 2016) ; see alsoBlixseth , 961 F.3d at 1084 (stating that exculpation provisions allow parties "to engage in the give-and-take of the bankruptcy proceeding without fear of subsequent litigation over any potentially negligent actions in those proceedings"); American Bankruptcy Institute Commission to Study the Reform of Chapter 11, 2012–2014 Final Report and Recommendations 251 (2014), http://commission.abi.org/full-report ("[Exculpatory provisions] encourag[e] parties to engage in the process and assist the debtor in achieving a confirmable plan—actions that committees, committee members, other estate representatives and their professionals, and certain parties (such as key lenders) may not be willing to undertake in the face of litigation risk."). And as the bankruptcy court pointed out in In re Chemtura Corp. , 439 B.R. 561, 610 (Bankr. S.D.N.Y. 2010), "exculpation provisions are included so frequently in chapter 11 plans because stakeholders all too often blame others for failures to get the recoveries they desire; seek vengeance against other parties; or simply wish to second guess the decisionmakers in the chapter 11 case." The Exculpation Clause in the Plan is intended to limit such second guessing: If a party brings a claim against one or more of the Exculpated Parties arising from their conduct in this case, the challenged conduct must at least rise to the level of gross negligence. The Exculpation Clause thus provides a degree of finality to the Exculpated Parties and "assures them they will not be second-guessed and hounded by meritless claims following the conclusion of the bankruptcy case." Alpha Nat. Res. , 556 B.R. at 261.

In urging the Court not to approve the Exculpation Clause, the UST relies on caselaw from Delaware bankruptcy courts holding that an exculpation provision may not provide protection to parties who are not estate fiduciaries. SeeIn re Washington Mut. , 442 B.R. 314, 350–51 (Bankr. D. Del. 2011) ("The exculpation clause must be limited to the fiduciaries who have served during the chapter 11 proceeding: estate professionals, the Committees and their members, and the Debtors' directors and officers."); see alsoIn re Indianapolis Downs, LLC , 486 B.R. 286, 306 (Bankr. D. Del. 2013) (limiting exculpation "so as to apply only to estate fiduciaries" was consistent with applicable law); In re Tribune Co. , 464 B.R. 126, 189 (Bankr. D. Del. 2011) (same). But this limitation on exculpation provisions imposed by Delaware bankruptcy courts has not gained acceptance elsewhere. See, e.g. , Blixseth , 961 F.3d at 1084 (holding that bankruptcy court properly approved exculpation provision covering non-estate fiduciaries, including Credit Suisse, "the Debtors' largest creditor"); In re Winn-Dixie Stores, Inc. , 356 B.R. 239, 260–61 (Bankr. M.D. Fla. 2006) (approving exculpation of bank and its related parties for significant contributions made during the chapter 11 cases). And in the Sixth Circuit, bankruptcy courts have regularly approved exculpation provisions that extend beyond estate fiduciaries. See, e.g. , In re Ventilex USA Inc. , No. 10-16642 (Bankr. S.D. Ohio Aug. 31, 2011) (Doc. 290) (approving an exculpation provision covering "Plan Proponents, the Reorganized Debtor, Plan Sponsor, and any of their respective directors, officers, employees, members, attorneys, consultants, advisors, and agents"); In re Wornick Co. , No. 08-10654 (Bankr. S.D. Ohio June 27, 2008) (Doc. 262) (approving plan provision exculpating, among others, the debtors' directors, noteholders, indenture trustees, and a purchaser of assets); In re Amcast Indus. Corp ., No. 04-40504 (Bankr. S.D. Ohio June 29, 2005) (Doc. 948) (approving an exculpation provision covering secured lenders and DIP lenders, among other non-estate fiduciaries).

See alsoIn re FirstEnergy Sols. Corp. , No. 18-50757 (Bankr. N.D. Ohio Oct. 16, 2019) (Doc. 3283), ¶¶ 44, 111.D (confirming a plan providing for exculpation of non-estate fiduciaries); In re AmFin Fin. Corp. , No. 09-21323 (Bankr. N.D. Ohio Nov. 3, 2011) (Doc. 1314) ¶ KK (approving exculpation provision that included noteholders and bondholders given its "importan[ce] to the success of" the plan and where it was "agreed upon in return for the [exculpated] parties providing benefits to the Debtors and other creditors or groups of creditors").

In his declaration in support of confirmation of the Plan, Moore testified that the Exculpation Clause is "fair and reasonable, essential to the reorganization, supported by virtually all creditors, and in the best interests of the [Debtors'] [e]states." Moore Decl. ¶ 57. Neither the UST nor any other party in interest chose to cross-examine Moore or offer any evidence to rebut his declaration testimony. Based on Moore's testimony and the arguments of counsel asserted at the Confirmation Hearing and in the Omnibus Reply, the Court finds that the protections afforded by the Exculpation Clause, which provides a carve-out for gross negligence, intentional fraud and willful misconduct, represent an integral component of the RSA and the Plan and are fair and reasonable. This conclusion is also borne out by the events of this case. As the Debtors correctly point out, the Restructuring Support Parties all "provided significant value to the Debtors' estates by setting forth and agreeing to terms of a compromise that opened up a viable path to plan confirmation for each of the Debtors." Omnibus Reply at 8. In addition, several of the Restructuring Support Parties—namely, the Prepetition Term Loan Lenders, Murray Energy and Javelin Global—provided vital DIP financing that enabled operations at the Oak Grove Mine to resume, the sale of the Maple Eagle Mine to occur, and postpetition reclamation work at the properties owned by Murray Alabama Minerals, LLC to continue. Moreover, the commitments made by the Restructuring Support Parties resulted in the sale of the Maple Eagle Mine, established the framework for the going-concern sale of the Oak Grove Mine, and set the Debtors on the path to emergence from Chapter 11. Seeid . For these reasons, and under the circumstances of this case, it is appropriate to extend the protection afforded by the Exculpation Clause to non-estate fiduciaries. See Upstream Energy Servs. v. Enron Corp. (In re Enron Corp.) , 326 B.R. 497, 504 (S.D.N.Y. 2005) (affirming bankruptcy court's order confirming plan with exculpation provision that included non-fiduciaries because it was "reasonable and customary and in the best interests of the estates"); Winn-Dixie Stores, Inc. , 356 B.R. at 261 (confirming plan containing provision exculpating bank and indenture trustee, in addition to estate fiduciaries, based on the "significant contributions made to this case by the beneficiaries of the exculpation clause").

The second argument asserted by the UST in support of its objection—that the Exculpation Clause is overly broad because it extends to acts and omissions occurring prepetition—also misses the mark. According to the UST, a plan exculpation provision must be temporally limited so that it encompasses "only actions taken in connection with a bankruptcy case between the petition date and the effective date of the plan." UST Obj. at 5. The UST cites three decisions as authority for this proposition— In re Fraser's Boiler Serv., Inc. , 593 B.R. 636, 639–40 (Bankr. W.D. Wash. 2018) ; In re Yellowstone Mountain Club, LLC , 460 B.R. 254, 271 (Bankr. D. Mont. 2011) ; and In re Coram Healthcare Corp. , 315 B.R. 321, 337 (Bankr. D. Del. 2004). But none of these decisions actually holds that exculpation should be confined to postpetition acts or omissions. In Fraser's Boiler Service , the court examined an exculpation provision that did not clearly specify whether it covered post-effective date conduct of the exculpated parties. Fraser's Boiler Serv. , 593 B.R. at 640. While the Fraser's Boiler Service court noted that, "[e]xculpation clauses generally only exculpate those actions taken in connection with a bankruptcy case between the petition date and the effective date of the plan," the court did not decide whether such provisions must be subject to this temporal limitation. Id. Nor did the court in Yellowstone Mountain Club have to address this question. There, the court simply pointed out that the plan exculpation provision at issue covered only postpetition acts and omissions. Yellowstone Mountain Club , 460 B.R. at 254, 271 ("The Court agrees with Beckett's observation that ¶ 8.4 only protects those acts that occurred in connection with the Debtors' Chapter 11 cases between November 10, 2008 and July 17, 2009. Acts falling outside the foregoing dates are not protected."). Finally, the UST's reliance on Coram Healthcare —for the related proposition that releases of the Chapter 11 trustee, equity committee, and their professionals are not permissible except to the extent they are limited to postpetition activity—is also misplaced. The Bankruptcy Code expressly provides that a trustee and an equity committee may only be appointed after the filing of a Chapter 11 case. See 11 U.S.C. § 1102(a)(1) (stating that the UST may "as soon as practicable after the order for relief " appoint an unsecured creditors committee and, if deemed appropriate, "additional committees of creditors or equity security holders") (emphasis added); 11 U.S.C. § 1104(a) (authorizing the appointment of a trustee "after the commencement of the case ") (emphasis added). Thus, as a practical matter, neither a Chapter 11 trustee nor an equity committee could engage in prepetition acts or omissions that might give rise to liability. And neither party could engage in the type of prepetition conduct required to effectuate the sort of bankruptcy court-approved transactions that support and ultimately lead to the confirmation of a Chapter 11 debtor's plan. Coram Healthcare is therefore wholly inapposite. In short, none of the cases cited by the UST provide support for the temporal limitation on the reach of the Exculpation Clause that the UST would have the Court impose.

Here, prepetition negotiations between multiple stakeholders led to the execution of the RSA, the agreement that enabled the Debtors to obtain the DIP Financing required to fund their postpetition operations. The RSA also formed the basis of the marketing and sale process approved by the Court and the eventual filing of the Plan. Good faith prepetition negotiations and actions related to the formulation of a restructuring support agreement fall squarely within the type of conduct that may be protected by an appropriately tailored plan exculpation provision. As one court explained:

[A] proper exculpation provision is a protection not only of court-supervised fiduciaries, but also of court-supervised and court-approved transactions. If this Court has approved a transaction as being in the best interests of the estate and has authorized the transaction to proceed, then the parties to those transactions should not be subject to claims that effectively seek to undermine or second guess this Court's determinations. In the absence of gross negligence or intentional wrongdoing, parties should not be liable for doing things that the Court authorized them to do and that the Court decided were reasonable things to do.

In re Aegean Marine Petroleum Network Inc ., 599 B.R. 717, 721 (Bankr. S.D.N.Y. 2019).

In sum, exculpation need not be limited to postpetition conduct. A properly crafted exculpation provision (like the Plan's Exculpation Clause) may properly encompass all acts or omissions of the Exculpated Parties—whether occurring prepetition or postpetition—that relate to or otherwise involve the negotiation of and entry into transactions approved by the Court, such as the DIP financing obtained by the Debtors, the marketing and sale process, and the filing and prosecution of the Plan. To hold otherwise would penalize, rather than encourage, good faith efforts to negotiate and resolve restructuring issues consensually in advance of a Chapter 11 filing.

2. The Funds Objection

The UMWA Funds make three primary arguments in opposition to the Plan. First, they contend that the Oak Grove Avoidance Actions are not property of the estate and therefore are not saleable assets. Second, they argue that the sale of the Oak Grove Avoidance Actions would provide no benefit to the Debtors' bankruptcy estates. Third, they take the position that the Debtors' interest in the proceeds of the Oak Grove Avoidance Actions cannot be sold because the proceeds are not yet property of the estate. For the reasons explained below, none of these arguments has merit.

a. The Oak Grove Avoidance Actions Are Property of the Estate.

Section 363(b) provides for the sale of "property of the estate," 11 U.S.C. § 363(b), and § 1123(b)(4) states that a plan may "provide for the sale of all or substantially all of the property of the estate," 11 U.S.C. § 1123(b)(4). And so, whether a sale is under § 363(b) or a plan sale under § 1123(b)(4), a debtor in possession "may sell only assets that are property of the estate." Cadle Co. v. Mims (In re Moore) , 608 F.3d 253, 258 (5th Cir. 2010) ; see alsoIn re Stein , 281 B.R. 845, 848 (Bankr. S.D.N.Y. 2002) ("Since the trustee can only sell property of the estate ... the threshold question is whether [the assets to be sold] are property of the estate."). According to the UMWA Funds, "[a]voidance actions are not property of a debtor-in-possession or the estate and, thus, cannot be sold or transferred under Section 363 or 1123 of the Bankruptcy Code." Funds Supp. Br. at 6.

As support for their position that the Oak Grove Avoidance Actions are not property of the estate and therefore may not be sold, the UMWA Funds rely on a line of authority holding that avoidance actions are non-transferrable statutory powers, rather than estate property that may be sold. An early case that reached that conclusion is Robison v. First Financial Capital Management Corp. (In re Sweetwater) , 55 B.R. 724 (D. Utah 1985), aff'd in part and rev'd in part , 884 F.2d 1323 (10th Cir. 1989). There, the district court stated: "The avoiding powers are not ‘property’ but a statutorily created power to recover property." Id. at 731. That view also was expressed by the Third Circuit in Official Committee of Unsecured Creditors v. Chinery (In re Cybergenics Corp.) , 226 F.3d 237 (3d Cir. 2000), where the court concluded that state law fraudulent transfer claims had not been sold to a purchaser of the estate's assets:

[W]e reach the inescapable conclusion that the fraudulent transfer claims, which state law provided to Cybergenics' creditors, were never assets of Cybergenics, and this conclusion is not altered by the fact that a debtor in possession is empowered to pursue those fraudulent transfer claims for the benefit of all creditors. The avoidance power itself, which we have analogized to the power of a public official to carry out various responsibilities in a representative capacity, was likewise not an asset of Cybergenics, just as this authority would not have been a personal asset of a trustee, had one been appointed.

Id. at 245. The Third Circuit itself—in Artesanias Hacienda Real S.A. de C.V. v. North Mill Capital, LLC (In re Wilton Armetale, Inc.) , 968 F.3d 273, 285 (3d. Cir. 2020) —recently described this language from the Cybergenic s opinion in terms that made clear that the court viewed it as dicta . In Wilton Armetale , the circuit court stated: " Cybergenics does not hold that trustees cannot transfer causes of action. It leaves that question open because the asset transfer at issue did not reach the creditors' claims." Id. at 285. And the Delaware Bankruptcy Court in Claridge Associates, LLC v. Schepis (In re Pursuit Capital Management, LLC) , 595 B.R. 631 (Bankr. D. Del. 2018), also pointed out that the Third Circuit has not held that avoidance actions are nontransferrable. The bankruptcy court stated:

Contrary to Defendants' position, the Third Circuit has not determined whether avoidance actions are property of the estate or whether such claims or a trustee's right to pursue avoidance actions can be sold. ... Cybergenics [ ] did not decide either of these matters as the agreement at issue did not purport to sell either. But, in dicta , the Court does posit that if property of the estate were at issue, the Court would not change its conclusion. The Court recognized that, with a few exceptions, property of the estate contains only a debtor's interest in property as of the bankruptcy filing. Citing to § 541, the Court also recognized that "property of the estate" is a term of art under the Bankruptcy Code. Thus, if the question were squarely before it, it is certainly possible that the Third Circuit might conclude that state-law

based avoidance actions are not property of the estate[.]

595 B.R. at 656–57.

As the Delaware bankruptcy court noted—and as this Court's research has borne out—courts are deeply divided on the issue of whether avoidance actions are property of the estate and if so, under what circumstances avoidance actions may be transferred or sold by a trustee or debtor in possession. See, e.g. , Cedar Rapids Lodge & Suites, LLC v. Seibert , No. 14–CV–04839, 2018 WL 747408, at *8–12 (D. Minn. Feb. 7, 2018) (collecting cases on both sides of the divide). There is no binding authority from the Sixth Circuit and no decision from the Sixth Circuit Bankruptcy Appellate Panel addressing this issue, but decisions from several bankruptcy courts in the Sixth Circuit are aligned with those courts that view avoidance actions as inalienable powers, rather than property of the estate that may be sold. SeeIn re Dinoto , 562 B.R. 679, 682 (Bankr. E.D. Mich. 2016) ; In re Clements Mfg. Liquidation Co. , 558 B.R. 187, 189 (Bankr. E.D. Mich. 2016) ; In re Feringa , 376 B.R. 614, 625 (Bankr. W.D. Mich. 2007) ; and LWD Land Co. v. Official Unsecured Creditor's Comm. (In re LWD, Inc.) , No. 5:06-CV-69-R, 2007 WL 1035149, at *8 (W.D. Ky. Mar. 30, 2007).

Taking the position that the Oak Grove Avoidance Actions are subject to sale, the Debtors rely on a recent decision in which a court of appeals affirmed the bankruptcy court's approval of the sale of avoidance actions to the party that would be the defendant in those actions. SeeSilverman v. Birdsell , 796 F. App'x 935 (9th Cir. 2020). The court of appeals affirmed the sale's approval after noting that "[t]he Bankruptcy Code allows a trustee to ‘sell, ... other than in the ordinary course of business, property of the estate.’ " Silverman , 796 F. App'x at 937. The appellants in Silverman made no argument that the avoidance actions were not property of the estate. The appellate court therefore appears to have assumed that the avoidance actions were property of the estate without discussing the issue. Other circuit courts have permitted the transfer of avoidance actions without analyzing the threshold question of whether avoidance actions constitute property of the estate. SeeMellon Bank N.A. v. Dick Corp. , 351 F.3d 290 (7th Cir. 2003) ; Duckor Spradling & Metzger v. Baum Trust (In re P.R.T.C., Inc.) , 177 F.3d 774 (9th Cir. 1999) ; Briggs v. Kent (In re Prof'l Inv. Props. of Am., Inc.) , 955 F.2d 623 (9th Cir. 1992).

The Debtors also relied on three unreported orders that approved the sale of avoidance actions. Omnibus Reply at 12. In two of those—In re Mission Coal Co. , No. 18-04177 (Bankr. N.D. Ala., Apr. 15, 2019), and In re FirstEnergy Solutions Corp. , No. 18-50757 (Bankr. N.D. Ohio, Jan. 25, 2019)—the sale of avoidance actions appears to have been unopposed. In the third, the unsecured creditors' committee filed a limited objection to the debtors' sale motion in which, among other things, the committee stated that it believed that "valuable causes of action, such as avoidance actions, [were] available for prosecution." In re Dura Auto. Sys., LLC , No. 19-12378, Doc. 970 at 3 (Bankr. D. Del. May 8, 2020). The objection was resolved by an agreement under which the sale order provided for the sale of avoidance actions against vendors that were continuing to do business with the buyer while carving out from the sale avoidance actions against vendors that were no longer providing goods or services to the business that was being sold. Id. , Doc. 1029 ¶ 34(a)(1), (a)(3) (Bankr. D. Del., May 15, 2020). This agreement allowed the buyer in Dura Automotive to maintain control over potential avoidance actions against vendors with whom it continued to do business, just as Hatfield seeks to do here. Indeed, the Debtors make no bones about the reason why Hatfield wants control over the Oak Grove Avoidance Actions:

Given that [Hatfield] will be operating Oak Grove on a go-forward basis, it is naturally concerned about the long-term viability of the business and of critical relationships with employees, vendors, landlords, and other trading partners. ... [I]f [Oak Grove] Avoidance Actions were aggressively prosecuted by the Plan Administrator ... then irreparable harm could be caused to the commercial relationships that [Hatfield] is and will be working hard to cultivate.

Debtors' Reply at 9.

There is nothing improper about this. In fact, "avoiding powers may be transferred for a sum certain" to a potential defendant of the action—a party that, of course, would not bring the avoidance claim—and need not be "sold to a creditor who agrees to pursue those avoidance powers for the benefit of all creditors." Simantob v. Claims Prosecutor, LLC (In re Lahijani) , 325 B.R. 282, 288 (B.A.P. 9th Cir. 2005).

Courts in Chapter 11 cases regularly approve motions to sell assets that include requests to sell avoidance actions. In addition to the cases cited by the Debtors, a number of other courts have entered orders approving requests to sell avoidance actions. SeeIn re Alpha Entm't LLC , No. 20-10940 (Bankr. D. Del. Aug. 7, 2020); In re Sugarfina Inc. , No. 19-11973 (Bankr. D. Del. Oct. 28, 2019); In re Loot Crate, Inc. , No. 19-11791 (Bankr. D. Del. Sept. 11, 2019); In re Synergy Pharms. Inc. , No. 18-14010 (Bankr. S.D.N.Y. Mar. 1, 2019); In re Relativity Media, LLC , No. 18-11358 (Bankr. S.D.N.Y. Aug. 21, 2018); In re Candi Controls, Inc. , No. 18-10679 (Bankr. D. Del. Apr. 25, 2018); In re BPS US Holdings Inc. , No. 16-12373 (Bankr. D. Del. Feb. 6, 2017); and In re Noble Logistics, Inc. , No. 14-10442 (Bankr. D. Del. May 7, 2014).

Several jurisdictions have local rules requiring that sale motions "highlight any provision pursuant to which the debtor seeks to sell or otherwise limit its rights to pursue avoidance claims under chapter 5 of the Bankruptcy Code." Bankr. D. Del. R. 6004-1(b)(iv)(K); see also Bankr. D. Nev. R. 6004(b)(6)(K); Bankr. D. Md. R. 6004-1(b)(4)(J); S.D.N.Y Amended Guidelines for the Conduct of Asset Sales by the Court ¶ D.11. Local bankruptcy rules and general orders also require debtors to highlight provisions in debtor in possession financing or cash collateral orders that place liens on avoidance actions. See, e.g. , Gen. Order 30-3, Bankr. S.D. Ohio, App. A, Procedures for Complex Chapter 11 Cases (Dec. 4, 2019), at 7 (requiring a motion seeking approval of debtor in possession financing or the use of cash collateral to highlight any provision granting a lien on avoidance actions); Bankr. S.D.N.Y. R. 4001-2(g)(9) (imposing limitations on interim orders approving the use of cash collateral or the obtaining of credit that grant liens on proceeds of avoidance actions, but providing no such limitation in connection with a final order). Indeed, the Court's final order approving debtor in possession financing in the Debtors' cases granted a lien on the Oak Grove Avoidance Actions and the Other Avoidance Actions and the proceeds thereof. See Final DIP Order ¶ 6(d) ("The term ‘DIP Collateral’ shall mean all assets and properties of each of the Debtors ... including, without limitation, each of the Debtors' rights, title and interests in ... (3) all claims and causes of action arising under chapter 5 of the Bankruptcy Code (‘Avoidance Actions’), whether pursuant to federal law or applicable state law, of the Debtors or their estates, and all proceeds thereof or judgments therefrom ...."). This lien was granted without any objection by the UMWA Funds. The failure to object to the Final DIP Order is inconsistent with the argument the UMWA Funds are now making that the Oak Grove Avoidance Actions are not property of the estate.

All of this suggests that courts view avoidance actions as property of the estate. But local rules and orders entered on motions in which the sales of avoidance actions were unopposed or resolved consensually will not carry the day in the face of the objection by the UMWA Funds. The Court thus turns to consider the arguments for and against the position that avoidance actions are property of the estate.

The extent of what constitutes property of the estate is delineated in § 541(a) of the Bankruptcy Code. The subsections of § 541(a) that are potentially relevant to the issue of whether avoidance actions are property of the estate include § 541(a)(1), (3), (4), and (7). See Brendan Gage, Is There a Statutory Basis For Selling Avoidance Actions? , 22 J. Bankr. L. & Prac. 3 Art. 1 (2013). The Court will consider each in turn.

i. Section 541(a)(1)

Section 541(a)(1) provides that the estate is comprised, subject to certain exceptions not relevant here, of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Property of the estate "is very broad in scope" and "[n]umerous courts have interpreted" the definition set forth in § 541(a)(1) "to include causes of action." In re Nicole Energy Servs., Inc. , 385 B.R. 201, 230 & n.25 (Bankr. S.D. Ohio 2008) ; see, e.g. , Parker v. Goodman (In re Parker) , 499 F.3d 616, 624 (6th Cir. 2007) ("As ‘legal and equitable interests,’ causes of action that belong to the debtor constitute property of the estate under § 541(a)(1)."); Bauer v. Commerce Union Bank , 859 F.2d 438, 440–41 (6th Cir. 1988) ("The Bankruptcy Code itself provides that the bankruptcy estate comprises ‘all legal or equitable interests of the debtor in property as of the commencement of the case,’ 11 U.S.C. § 541(a)(1), and it is well established that the ‘interests of the debtor in property’ include ‘causes of action.’ " (quoting Gochenour v. Cleveland Terminals Bldg. Co. , 118 F.2d 89, 93 (6th Cir. 1941) )).

Courts describe avoidance actions as causes of action. See, e.g. , Granfinanciera, S.A. v. Nordberg , 492 U.S. 33, 53, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) (describing the "right to recover a fraudulent conveyance under 11 U.S.C. § 548(a)(2)" as a "statutory cause of action"); Personette v. Kennedy (In re Midgard Corp.) , 204 B.R. 764, 771 (B.A.P. 10th Cir. 1997) (holding that "[a] proceeding ‘arises under’ the Bankruptcy Code if it asserts a cause of action created by the Code, such as ... avoidance actions under 11 U.S.C. §§ 544, 547, 548, or 549"); Lugo-Mender v. Equus Entm't Corp. (In re El Comandante Mgmt. Co., LLC) , 388 B.R. 469, 471 & n.1 (D.P.R. 2008) ("The confirmed Plan and the Confirmation Order transferred all of the Debtors' causes of action including the avoidance actions under 11 U.S.C. §§ 544, 545, 547, 548, 549, and 553(b)."); Archangel Diamond Corp. v. Lukoil ( In re Archangle Diamond Corp.) , No. 09-22621 HRT, 2010 WL 4386808, at *5 (Bankr. D. Colo. Oct. 28, 2010) ("Proceedings arising under the Bankruptcy Code assert causes of action created by the Code, such as avoidance actions under 11 U.S.C. §§ 544, 547, 548, or 549."). And the Bankruptcy Code itself describes avoidance actions as causes of action: Section 926, entitled "Avoiding powers," provides that if the debtor in a municipal bankruptcy "refuses to pursue a cause of action under section 544, 545, 547, 548, [or] 549(a)"—all avoidance actions—then the court, on the request of a creditor, "may appoint a trustee to pursue such cause of action." 11 U.S.C. § 926(a). Plus, the Supreme Court has noted that the "House and Senate Reports on the Bankruptcy Code indicate that § 541(a)(1)'s scope is broad" and that it "is intended to include in the estate any property made available to the estate by other provisions of the Bankruptcy Code," United States v. Whiting Pools , 462 U.S. 198, 204–05, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), which is precisely what the statutory provisions providing for avoidance do. Consistent with all this, courts have held that avoidance actions to recover fraudulent transfers are property of the estate under § 541(a)(1). SeeMoore , 608 F.3d at 262 (holding that "the fraudulent-transfer claims [under § 544(b) ] are property of the estate under § 541(a)(1)");Morley v. Ontos, Inc. (In re Ontos, Inc.) , 478 F.3d 427, 431 (1st Cir. 2007) ("The Bankruptcy Code broadly defines the property of the estate to be comprised of all ‘legal or equitable interests of the debtor in property as of the commencement of the case.’ " 11 U.S.C. § 541(a)(1). "It is well established that a claim for fraudulent conveyance is included within this type of property."). And, as already noted, the Seventh and Ninth Circuits have permitted the transfer of avoidance actions without discussing whether the actions constitute property of the estate.

The Fifth Circuit declined to "address the broader question whether a trustee may sell all chapter 5 avoidance powers, such as the power to avoid preferences under § 547 or to avoid fraudulent transfers under § 548." Moore , 608 F.3d at 261 n.13.

Another court has held that § 541(a)(1) should not be interpreted to bring fraudulent transfer actions into the bankruptcy estate because "to construe Section 541(a)(1) in such a manner would render Section 541(a)(3) to be superfluous." Steffen v. Gray, Harris & Robinson, P.A. , 283 F. Supp. 2d 1272, 1284 (M.D. Fla. 2003), aff'd , 138 F. App'x 297 (11th Cir. 2005). As discussed in more detail below, § 541(a)(3) provides that property of the estate includes "[a]ny interest in property that the trustee recovers under section ... 550." 11 U.S.C. § 541(a)(3). There is nothing superfluous about a statute that makes a claim property of the estate while another part of the statute makes the recovery on the claim property of the estate. In any event, "[t]he canon against surplusage is not an absolute rule," and " ‘[w]hile it is generally presumed that statutes do not contain surplusage, instances of surplusage are not unknown.’ " Marx v. Gen. Revenue Corp. , 568 U.S. 371, 385, 133 S.Ct. 1166, 185 L.Ed.2d 242 (2013) (quoting Arlington Cent. Sch. Dist. Bd. of Educ. v. Murphy , 548 U.S. 291, 299 n.1, 126 S.Ct. 2455, 165 L.Ed.2d 526 (2006) ); Lamie v. U.S. Tr. , 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) ("Surplusage does not always produce ambiguity and our preference for avoiding surplusage constructions is not absolute."); Piazza v. Nueterra Healthcare Physical Therapy (In re Piazza) , 719 F.3d 1253, 1266 (11th Cir. 2013) (stating that "for purposes of the Bankruptcy Code, ‘[r]edundancy is not the same as surplusage’ ") (quoting Kenneth N. Klee, Bankruptcy and the Supreme Court 20 (2008)). The superfluity argument therefore does not provide a basis for holding the Oak Grove Avoidance Actions to not be property of the estate. See Gage, 22 J. Bankr. L. & Prac. 3 Art. 1 ("Multiple subsections of 541(a) address property interests relating to avoidance and subsection (a)(1) can be read as covering yet another one of them: the avoidance action itself."). The foregoing analysis applies equally to other claims for avoidance of prepetition transfers, such as actions to avoid preferential transfers, because they too would exist "as of the commencement of the case." 11 U.S.C. § 541(a)(1). For all these reasons, the Court concludes that, to the extent that the Oak Grove Avoidance Actions involve prepetition transfers (the "Prepetition Oak Grove Avoidance Actions"), they are property of the estate under § 541(a)(1).

The UMWA Funds, however, have made clear that it is the postpetition critical vendor payments that the Court authorized earlier in this case that is the genesis of this dispute. See Funds Obj. at 9 ("If the [UMWA] Funds are successful on their appeal of the Critical Vendor Order, then the approximately $16.2 million would have been paid without proper authority. Such claims would be recoverable and could provide a recovery to unsecured creditors who are otherwise set to receive nothing under the Plan."); Funds' Supp. Br. at 1–2 ("[T]he [UMWA] Funds seek to preserve the possibility of avoidance and recovery in the event that they prevail on their appeal of the orders that granted Debtors authority to pay up to $16,000,000 to unidentified trade vendors."). A cause of action to recover a critical vendor payment made after the Petition Date would be brought under § 549 of the Bankruptcy Code, which provides that the "trustee [or debtor in possession] may avoid a transfer of property of the estate ... that occurs after the commencement of the case; and ... is not authorized under this title or by the court." 11 U.S.C. § 549(a)(2)(B). Unlike a cause of action to avoid a prepetition transfer, an action to recover a payment made after the Petition Date would not exist "as of the commencement of the case." Thus, although the Prepetition Oak Grove Avoidance Actions are property of the estate under § 541(a)(1), it is difficult to see how the actions to recover postpetition payments (the "Postpetition Oak Grove Avoidance Actions") could be property of the estate under that section.

ii. Sections 541(a)(3) and (a)(4)

Section 541(a)(3) provides that property of the estate includes "[a]ny interest in property that the trustee recovers under section ... 550," and § 550(a) in turn provides that, to the extent a transfer is avoided, "the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property." 11 U.S.C. §§ 541(a)(3), 550(a). Under § 541(a)(4), property of the estate includes "[a]ny interest in property preserved for the benefit of or ordered transferred to the estate under section ... 551," and § 551 provides that "[a]ny transfer avoided under section ... 544, 545, 547, 548, [or] 549 ... is preserved for the benefit of the estate ...." 11 U.S.C. §§ 541(a)(4), 551. Several courts have read one or both of these provisions as providing a basis for holding that the property actually recovered, preserved, or transferred is property of the estate, but that the avoidance actions themselves are not. SeeFeringa , 376 B.R. at 624 (relying on § 541(a)(3) and (4) as support for the conclusion that " Section 541 is quite clear that it is only the property that is actually recovered or preserved as a consequence of a successful avoidance action that in fact becomes property of the estate"); Wagner v. Christiana Bank & Tr. Co. (In re Wagner) , 353 B.R. 106, 112 (Bankr. W.D. Pa. 2006) (concluding, based on § 541(a)(3), that "it is clear that a mere ‘claim’ ... for potential or prospective recovery pursuant to [the] strong-arm powers does not qualify as property of the ... estate"); In re Lair , 235 B.R. 1, 63 (Bankr. M.D. La. 1999) (citing § 541(a)(3) in support of the court's conclusion that "the avoidance action is not property of the estate (but rather recovery pursuant to an avoidance power is property of the estate)"); In re Berlyn Corp. , 133 B.R. 170, 172 (Bankr. D. Mass. 1991) ("The Debtor's argument that its proposed fraudulent transfer action constitutes property of the estate under § 541(a)(3) is ... without merit; § 541(a)(3) includes only ‘any interest in property that the trustee recovers under section ... 550,’ not the cause of action for such recovery.").

The Supreme Court, however, has stated that "the right to recover a postpetition transfer under § 550 is clearly a ‘claim’ (defined in § 101(4)(A)) and is ‘property of the estate’ (defined in § 541(a)(3) )." United States v. Nordic Vill. Inc. , 503 U.S. 30, 37, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992). Nordic Village was a Chapter 11 case in which a trustee had been appointed after an officer of the company made a postpetition transfer of corporate funds to the Internal Revenue Service in order to pay his individual tax liability. Id. at 31, 112 S.Ct. 1011. The Chapter 11 trustee commenced an adversary proceeding against the IRS to avoid the transfer under § 549(a) of the Bankruptcy Code and to recover the funds under § 550(a). Id. The bankruptcy court granted a judgment in favor of the trustee and against the IRS, and the judgment was affirmed by the district court. Id. The court of appeals also affirmed, rejecting a sovereign immunity defense raised by the IRS. Id. at 32, 112 S.Ct. 1011. The issue in Nordic Village was whether § 106(c) of the Bankruptcy Code unequivocally expressed a waiver of the sovereign immunity of the United States from actions for monetary relief in bankruptcy cases. Id. at 31, 112 S.Ct. 1011. At the time, § 106 stated:

(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.

(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.

(c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity—

(1) a provision of this title that contains ‘creditor,’ ‘entity,’ or ‘governmental unit’ applies to governmental units; and

(2) a determination by the court of an issue arising under such a provision binds governmental units.

Id. at 32, 112 S.Ct. 1011.

The Supreme Court reversed the court of appeals after reading § 106(c) as being "susceptible of at least two plausible interpretations that do not authorize monetary relief." Id. at 34, 112 S.Ct. 1011. One of those interpretations relied on § 106(c)'s introductory clause "[e]xcept as provided in subsections (a) and (b)." It was in that context that the Supreme Court stated that "the right to recover" was property of the estate as defined in § 541(a)(3) :

This exception ... could be read to mean that the rules established in subsections (a) and (b) for waiver of Government "claim[s]" that are "property of the estate" are exclusive, and preclude any resort to subsection (c) for that purpose. That reading would bar the present suit, since the right to recover a postpetition transfer under § 550 is clearly a "claim" (defined in § 101(4)(A)) and is "property of the estate" (defined in § 541(a)(3) ).

Id. at 37, 112 S.Ct. 1011.

Thus, in Nordic Village, the Supreme Court described "the right to recover a postpetition transfer"—that is, the postpetition avoidance action itself—as property of the estate. Whether or not § 541(a)(3) compels this conclusion, Nordic Village provides strong authority for the view that the Postpetition Oak Grove Avoidance Actions are property of the estate.

iii. Section 541(a)(7)

There are also cases that rely on § 541(a)(7) as support for the proposition that avoidance actions are property of the estate. Section 541(a)(7) provides that property of the estate includes "[a]ny interest in property that the estate acquires after the commencement of the case." 11 U.S.C. § 541(a)(7). In one case, the bankruptcy court held that "causes of action that arise from the administration of the chapter 11 estate"—including an alleged postpetition avoidable transfer—"are property of the estate" and that "[t]his principle is codified in 11 U.S.C. § 541(a)(7)." Smith v. Morris R. Greenhaw Oil & Gas, Inc. (In re Greenhaw Energy, Inc.) , 359 B.R. 636, 642 (Bankr. S.D. Tex. 2007). In another, the court found that avoidance actions under either § 544 or § 549 "belong[ ] to the estate pursuant to § 541(a)(3) (or perhaps § 541(a)(7) )[.]" Gonzales v. United States (In re Silver) , 302 B.R. 720, 725 (Bankr. D.N.M. 2003), aff'd in part, rev'd in part , 303 B.R. 849 (B.A.P. 10th Cir. 2004), supplemented by 305 B.R. 381 (B.A.P. 10th Cir. 2004).

This makes sense because, just as prepetition claims are property of the estate under § 541(a)(1), postpetition claims are property of the Chapter 11 estate under § 541(a)(7). SeeMaloof v. BT Commercial Corp. , No. 1:07 CV 1902, 2008 WL 650325, at *4 (N.D. Ohio Mar. 5, 2008) ("Plaintiff's reliance on § 541(a)(1) to argue that only claims that existed at the commencement of the bankruptcy case are property of the estate is not well-taken. Section 541(a)(7) expressly includes any interest acquired after the commencement of the bankruptcy case."); In re Robotic Vision Sys., Inc. , 343 B.R. 393, 398 (Bankr. D.N.H. 2006) (relying on § 541(a)(7) in holding that "[c]laims of malpractice and fraud that arise during the performance of services for a debtor or a debtor in possession in a chapter 11 proceeding are property of the bankruptcy estate"); In re Betty Owens Sch., Inc. , No. 96 CIV. 3576 (PKL), 1997 WL 188127, at *2 (S.D.N.Y. Apr. 17, 1997) (holding that a cause of action that arose postpetition in Chapter 11 case "would have become part of the bankruptcy estate pursuant to § 541(a)(7)"). The Postpetition Oak Grove Avoidance Actions fall within the purview of § 541(a)(7) as property that the Debtors' estates acquired after the Petition Date.

iv. Abandonment

Cases decided in the context of abandonment under § 554(a) of the Bankruptcy Code provide further support for the view that avoidance actions are property of the estate. The only property that is subject to abandonment is property of the estate. See 11 U.S.C. § 554(a) ("After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate."). And the Sixth Circuit has held that a party in interest had standing to assert an avoidance action seeking to avoid a fraudulent transfer because the trustee abandoned the avoidance action. SeeHatchett v. United States , 330 F.3d 875, 886 (6th Cir. 2003). In Hatchett , the district court had held that the United States did not have standing to assert a fraudulent-conveyance defense because the Hatchetts had filed a Chapter 7 bankruptcy case and only the trustee "had the exclusive authority to pursue a claim of fraudulent conveyance under 11 U.S.C. § 548." Id. at 885. The Sixth Circuit reversed the district court, holding that the government had standing because the trustee had "filed a motion to abandon the fraudulent conveyance action after determining that the liens filed in favor of the IRS and the State of Michigan exceeded the Hatchett's equity in the properties at issue." Id. Noting that the trustee's fraudulent conveyance action had been "officially abandoned," the court found that the government therefore had standing to bring it. Id. And the Fourth Circuit held that parties lacked standing to bring certain actions that were "similar in object and purpose" to the bankruptcy trustee's fraudulent conveyance claims because "until there is an ‘abandonment’ by the trustee of his claim the individual creditor has no standing to pursue it." Nat'l Am. Ins. Co. v. Ruppert Landscaping Co. , 187 F.3d 439, 441 (4th Cir. 1999). Because the only property that may be abandoned is property of the estate, these decisions suggest that the appellate courts deemed the fraudulent transfer actions to be property of the estate.

The foregoing discussion distills to two points. First, while they have taken alternative analytical paths to the same conclusion, many courts—including the First, Fifth, Seventh and Ninth Circuits—have determined, either expressly or impliedly, that avoidance actions constitute property of a debtor's bankruptcy estate. Second, there are a number of reported and unreported decisions approving the encumbrance, sale or assignment of avoidance actions. While recognizing that there are divergent views expressed in the case law, the Court concludes that avoidance actions are not mere statutory powers. Rather, they constitute claims or causes of action that are brought into the bankruptcy estate by operation of one or more of § 541(a)(1), (a)(3), (a)(4) or (a)(7) —depending on whether the subject avoidance claim involves a prepetition or postpetition transfer.

Alternatively, the Plan's proposed treatment of the Oak Grove Avoidance Actions is permissible under a different subsection of § 1123(b) of the Bankruptcy Code — § 1123(b)(3)(B) —which provides that a Chapter 11 plan may provide for "the retention and enforcement by the debtor, by the trustee, or by a representative of the estate appointed for such purpose, of any ... claim or interest [belonging to the debtor or to the estate]." 11 U.S.C. § 1123(b)(3)(B). The Oak Grove Avoidance Actions are claims belonging to the Debtors' bankruptcy estates within the meaning of § 1123(b)(3)(B). SeeCiticorp Acceptance Co. v. Robison (In re Sweetwater) , 884 F.2d 1323, 1327 (10th Cir. 1989) ("These avoidance claims are also claims of the estate. ... [Section] 101(4)['s] ... broad definition [of claim] includes the estate's right to payment under §§ 547, 549 and 553."). And if the Oak Grove Avoidance Actions were not sold to Hatfield, then the Plan Administrator would be authorized by the Wind-Down Trust Agreement to pursue them:

[T]he Plan Administrator shall be expressly authorized to ... (r) retain and enforce all rights to commence and pursue, as appropriate, any and all Causes of Action (including Avoidance Actions), whether arising before or after the Petition Date .... other than Causes of Action (including Avoidance Actions) (a) acquired by [Hatfield] or its subsidiaries in accordance with the Sale Transaction[.]

Wind-Down Trust Agreement § 2.2(r).

If the Oak Grove Avoidance Actions were not property of the estate that could be acquired by Hatfield, then they—along with the Other Avoidance Actions—would be transferred to the Wind-Down Trust. The Plan Administrator would then be appointed under § 1123(b)(3)(B) to serve as the representative of the Debtors' bankruptcy estates with respect to the Oak Grove Avoidance Actions, just as it is with respect to the Other Avoidance Actions. "[C]ourts apply a case-by-case analysis to determine whether the appointed party's responsibilities qualify it as a representative of the estate." McFarland v. Leyh (In re Texas Gen. Petroleum Corp.) , 52 F.3d 1330, 1335 (5th Cir. 1995). Here, the Plan Administrator will, among other things, make distributions to beneficiaries of the Wind-Down Trust, including creditors entitled to receive distributions under the Plan. As the Debtors state, the Plan Administrator, "[a]s the duly appointed representative of the Debtors' Estates ... will ... be vested with the authority to prosecute (or not) all Avoidance Actions for the benefit of [Wind-Down Trust] beneficiaries." Debtors' Reply at 3. Thus, the Court concludes that the Plan Administrator is acting as a "representative of the estate" within the meaning of § 1123(b)(3)(B) and that the treatment of the Oak Grove Avoidance Actions and the Other Avoidance Actions is appropriate under that section.

b. The Sale of the Oak Grove Avoidance Actions Benefits the Debtors' Estates.

The UMWA Funds contend that the Oak Grove Avoidance Actions and their proceeds may not be transferred to Hatfield because the transfer does not benefit all creditors and particularly does not benefit general unsecured creditors. Before addressing this argument, it is important to note the arguments that are not being asserted by the UMWA Funds. The UMWA Funds are not asserting an absolute priority challenge based on § 1129(b)(2)(B) of the Bankruptcy Code, under which "a dissenting class of unsecured creditors must be provided for in full before any junior class can receive or retain any property under the plan." Future Energy Corp. , 83 B.R. at 497. If the shareholders of the Debtors were retaining stock, then the UMWA Funds would have a valid objection under the absolute priority rule and would be correct that the Plan could not be confirmed. But the equity interests in the Debtors are being cancelled, and no class of claims or interests that is junior to the general unsecured class is receiving or retaining any property under the Plan. Nor have the UMWA Funds asserted a best-interests objection under § 1129(a), because there is no doubt that, if every dollar paid to a critical vendor were recovered in a Chapter 7 liquidation, the UMWA Funds would not receive any of it; the entire fund would be paid to satisfy the DIP Claims given that the Debtors granted the Murray Met DIP Lenders liens on the Oak Grove Avoidance Actions and the proceeds of those avoidance actions. Finally, the UMWA Funds have not challenged the Wind-Down Trust on the ground that general unsecured creditors in Class 5 are not named as beneficiaries.

Recognizing that these arguments are untenable, the UMWA Funds are left to argue that the Oak Grove Avoidance Actions must be utilized for the benefit of unsecured creditors—and especially general unsecured creditors. Funds Supp. Br. at 3, 11. All that is required, however, is that the Plan Administrator be a representative of the estate . And "the bankruptcy ‘estate’ is not synonymous with the concept of a pool of assets to be gathered for the sole benefit of [general] unsecured creditors." Davis v. Barcom, Inc. ( In re Quebecor World (USA)) , No. 08-10152-JMP, 2012 WL 37547, at *5 (Bankr. E.D. Tenn. Jan. 9, 2012) (quoting Stalnaker v. DLC, Ltd. , 376 F.3d 819, 823–24 (8th Cir. 2004) ). Instead, "[t]he concept of benefit to the estate includes benefit to administrative claimholders, secured claimholders, priority claimholders, as well as the general unsecureds." Gordon v. Love ( In re Pullen) , No. 09-61108-MGD, 2013 WL 6000568, at *3 (Bankr. N.D. Ga. Nov. 10, 2013) ; see alsoSweetwater , 884 F.2d at 1327 ("[U]nder the plan Robison is responsible for reducing these claims to cash and paying the administrative claims. In this respect any recovery by Robison will obviously benefit the estate's unsecured administrative creditors."); see alsoGonzales v. Conagra Grocery Prods. Co. (In re Furr's Supermarkets, Inc.) , 373 B.R. 691, 700 (B.A.P. 10th Cir. 2007) (holding in the context of § 550(a) that "[w]hile the administrative claimants may not be prepetition unsecured, nonpriority creditors, they are nonetheless unsecured creditors that will benefit directly from Trustee's avoidance and recovery actions" and that "[t]his constitutes a ‘benefit to the estate’ "). The UMWA Funds cite Sweetwater for the proposition that "[t]he primary concern is whether a successful recovery... would benefit the debtor's estate and particularly, the debtor's unsecured creditors." Sweetwater , 884 F.2d at 1327. But the "reason for the emphasis on unsecured creditors" when determining whether a party appointed to pursue an avoidance action is acting as a representative of the estate under § 1123(b)(3)(B) "is that the proceeds recovered in an avoidance action satisfy the claims of priority and general unsecured creditors before the debtor benefits." Texas Gen. Petroleum , 52 F.3d at 1335. In other words, the focus is on ensuring that the priority scheme of the Bankruptcy Code is honored. SeeMellon Bank , 351 F.3d at 293 (holding that "benefit to the estate ... in bankruptcy parlance denotes the set of all potentially interested parties—rather than to any particular class of creditors" and that "[w]hat happens to recoveries that reach the estate's coffers depends on contractual and statutory entitlements"). In fact, the Seventh Circuit in Mellon Bank took pains to point out that "[l]est [its] way of resolving the issue be taken to assume that § 550(a) requires that some benefit flow to unsecured creditors, we add that the statute does not say this." Id. Neither does § 1123(b)(3)(B).

The Code's priority scheme is being fully observed here. Neither the Debtors nor their shareholders are receiving any benefit from the Oak Grove Avoidance Actions. The reason general unsecured creditors are not receiving a distribution is that the priority scheme of the Bankruptcy Code does not entitle them to any recovery. Nothing about the Plan contravenes the priorities established by the Bankruptcy Code. The UMWA Funds could prevail only if an estate representative was legally prohibited from paying proceeds of avoidance actions to the purchaser of the debtors' assets rather than to unsecured creditors. But this is simply not the law.

The UMWA Funds argue that there is no benefit to the estate here because the net proceeds of the Oak Grove Avoidance Actions would be paid to Hatfield. Funds Supp. Br. at 11–13. But "[t]here is nothing in the Bankruptcy Code or precedent which indicates that the ‘benefit’ to the estate and its creditors cannot occur prior to the actual recovery on a claim for § 1123(b)(3)(B) purposes." Winston & Strawn v. Kelly (In re Churchfield Mgmt. & Inv. Corp.) , 122 B.R. 76, 82 (Bankr. N.D. Ill. 1990). Here, the Debtors' estates have received substantial consideration in exchange for the Wind-Down Trust's retention of the Oak Grove Avoidance Actions and the transfer of any proceeds of the Oak Grove Avoidance Actions to Hatfield. As part of the overall Restructuring contemplated by the RSA, the Restructuring Support Parties, including the entities that formed Hatfield—MC Southwork and Murray Energy—provided the Debtors with DIP and exit financing. They also agreed to fund the Wind-Down Trust. Without these commitments, the Debtors would not be able to emerge from Chapter 11. In that scenario, the Debtors' liquidation analysis established that the holders of DIP Claims would receive, at most, approximately 35 cents on the dollar. Furthermore, holders of unsecured administrative and priority creditors would receive nothing if the Plan were not confirmed. But under the Plan they are being paid in full. None of this would be possible were it not for the deal reflected in the RSA and effectuated through the Plan and the Stalking Horse APA. And the sale of the Oak Grove Avoidance Actions or the transfer of the Oak Grove Avoidance Actions to the Wind-Down Trust and the sale of their proceeds is just one component—but an integral component—of that deal. See All Star Int'l Trucks, Inc. v. Burlington Motor Carriers, Inc. (In re Burlington Motor Holdings, Inc.) , No. 95-1559, 2002 WL 63595, at *3 (D. Del. 2002) (describing assignment of avoidance actions to buyer of substantially all of the debtors' assets through Chapter 11 plan sale as being "part of the total bargain" and finding that "the estate benefitted from such assignment" where buyer assumed certain liabilities, including tax and administrative claims, and made cash payment to unsecured creditors). Thus, the treatment of the Oak Grove Avoidance Actions clearly benefitted the Debtors' estates. And given that benefit, the Court concludes that the Plan Administrator is a properly designated estate representative under § 1123(b)(3)(B).

The UMWA Funds' argument essentially boils down to the following proposition: The only way that the Oak Grove Avoidance Actions will benefit the estate is if they are asserted, reduced to cash proceeds through litigation or settlement, and those proceeds are distributed to unsecured creditors—preferably general unsecured creditors. But this is inconsistent with the view that the phrase "benefit of the estate" as used in § 550(a) does not require the benefit to be incurred as a direct result of the avoidance recovery itself. Rather, "the benefit from an avoidance action can come from an assignment of a cause of action prior to the litigation's resolution, and need not be obtained at the time of recovery." Tronox Inc. v. Anadarko Petroleum Corp. (In re Tronox Inc.) , 464 B.R. 606, 614 (Bankr. S.D.N.Y. 2012). For example, the Seventh Circuit held that the granting of a lien on preferential transfer actions benefitted the estate even though it was only the secured creditors that were entitled to the proceeds because the granting of the lien facilitated postpetition financing and the sale of the debtor. SeeMellon Bank , 351 F.3d at 293 ; see alsoLahijani , 325 B.R. at 288 ("[A]voiding powers may be transferred for a sum certain. The benefit to the estate in such circumstances is the sale price, which might or might not include a portion of future recoveries for the estate." (citations omitted)). If an Oak Grove Avoidance Action were pursued and the proceeds paid to Hatfield, then the Oak Grove Avoidance Action would have been used for the benefit of the estate for all the reasons already explained.

c. The Debtors May Sell Their Contingent Interest in the Proceeds of the Oak Grove Avoidance Actions.

The final argument the UMWA Funds make is that the proceeds of the Oak Grove Avoidance Actions cannot be sold to Hatfield because "the proceeds of avoidance actions are not property of the bankruptcy estate until such funds have actually been recovered." Funds Supp. Br. at 13. It is well established, however, that "[p]roperty is construed generously under the Bankruptcy Code" and that "[e]very conceivable interest of the debtor, future, nonpossessory, contingent, speculative, and derivative, is within the reach of § 541." Tyler v. DH Capital Mgmt., Inc. , 736 F.3d 455, 461 (6th Cir. 2013) (citations and internal quotation marks omitted). "[C]ourts have, across a wide variety of circumstances, almost uniformly adhered to the view that contingent interests are property of the estate under § 541(a)(1)," Booth v. Vaughan (In re Booth) , 260 B.R. 281, 285 (B.A.P. 6th Cir. 2001), and contingent interests are often sold in bankruptcy. See, e.g. , Irons v. Maginnis (In re Irons) , 572 B.R. 877, 890 (Bankr. N.D. Ohio 2017) (holding that a debtor's contingent right to occupy and reside in property constituted property of the estate under § 541(a) that could be sold in a § 363 sale); Sterling Vision, Inc. v. Sterling Optical Corp. (In re Sterling Optical Corp.) , 371 B.R. 680, 691–92 (Bankr. S.D.N.Y. 2007) (holding that a debtor's contingent right to certain surplus funds was property of the estate under § 541(a)(1) that was sold in a § 363 sale); Mullen v. Jones (In re Jones) , 487 B.R. 224, 229–30 (Bankr. D. Ariz. 2012) (holding that a debtor had at least a contingent interest in receiving property that was property of the estate under § 541(a)(1) and that could be sold in a § 363 sale), aff'd , No. BAP AZ-12-1644, 2014 WL 465631 (B.A.P. 9th Cir. Feb. 5, 2014) ; see alsoIn re Claar Cellars LLC , No. 20-00044-WLH11, 2020 WL 1238924, at *4 (Bankr. E.D. Wash. Mar. 13, 2020) (noting that sales of property of the estate under § 363(b) "can be crafted countless ways and showcase many features," including the "sharing of avoidance recoveries or other contingent estate assets"); Rhiel v. OhioHealth Corp. (In re Hunter) , 380 B.R. 753, 779 (Bankr. S.D. Ohio 2008) ("Property of the estate ... includes ‘all legally recognizable interests although they may be contingent and not subject to possession until some future time.’ " (quoting Sicherman v. Ohio Public Emps. Deferred Comp. Program (In re Leadbetter) , 1993 WL 141068 at *2 (6th Cir. Apr. 30, 1993) )).

The decisions on which the UMWA Funds rely— FDIC v. Hirsch (In re Colonial Realty Co.) , 980 F.2d 125 (2d Cir. 1992) ; Geron v. Craig (In re Direct Access Partners, LLC) , 602 B.R. 495 (Bankr. S.D.N.Y. 2019) ; and Meoli v. Huntington Nat'l Bank (In re Teleservices Grp., Inc.) , 463 B.R. 28 (Bankr. W.D. Mich. 2012) —are inapposite. Colonial Realty , Direct Access Partners , and Teleservices held that fraudulently conveyed property is not property of the estate until the property has actually been recovered. Those cases, however, did not address the issue before the Court—whether contingent interests in proceeds of avoidance actions are property of the estate that may be the subject of a sale transaction. To be clear, the Court is not holding that the funds paid in accordance with the Court's Critical Vendor Decision are property of the estate. For example, if funds paid to a critical vendor were contained in a bank account and could somehow be identified, the Court would not hold that those funds are property of the estate under § 541(a)(1). See Rajala v. Gardner , 709 F.3d 1031, 1038 (10th Cir. 2013) ("[I]nterpreting § 541(a)(1) to include fraudulently transferred property would render § 541(a)(3) meaningless with respect to property recovered in a fraudulent transfer action."); Spradlin v. Khouri (In re Bruner) , 561 B.R. 397, 405 (B.A.P. 6th Cir. 2017) ("It is not until the transfer is avoided under § 549(a) that the property becomes property of the estate."); Buckeye Check Cashing, Inc. v. Meadows (In re Meadows) , 396 B.R. 485, 494 (B.A.P. 6th Cir. 2008) ("If estate property transferred without authorization remains property of the estate [and that is recoverable under § 549(a) ], § 541(a)(3) is redundant, a conclusion we refuse to endorse."). Instead, it is the contingent interest in the proceeds—the right to receive the proceeds if any proceeds are ever generated—that Hatfield is receiving under the Stalking Horse APA.

For the reasons explained above, the Court has determined that the Avoidance Actions constitute property of the estate, and as such may be sold or assigned by the Debtors. But as the Court noted in its oral ruling, having concluded that the Debtors' contingent interest in any proceeds of the Oak Grove Avoidance that may ultimately be recovered is itself estate property that is subject to sale or assignment, it was not necessary for the Court to make this determination.

Hatfield made the purchase of the Oak Grove Avoidance Actions or their proceeds a part of the Stalking Horse APA so that the Oak Grove Avoidance Actions would not be pursued in a way that would harm its business relationships with the potential defendants of the actions. In the end, the UMWA Funds' position is that the asset purchase cannot be structured in that fashion—that if Hatfield wishes to purchase Murray Oak Grove's assets, then it must do so subject to the possibility that its vendors and other business partners would be the target of avoidance actions. In effect, if the UMWA Funds are right, then the Oak Grove Avoidance Actions must be prosecuted for the benefit of an out-of-the-money class of general unsecured creditors even though the pursuit of those avoidance actions potentially would harm the business of the entity whose asset purchase is the only reason unsecured administrative expense and priority claims are in the money. That cannot be the law. The Court concludes that the Oak Grove Avoidance Actions and their proceeds are property of the estate that may be sold.

B. Section 1129(a)(3)

Under § 1129(a)(3), a plan must have "been proposed in good faith and not by any means forbidden by law." 11 U.S.C. § 1129(a)(3). Although the Bankruptcy Code does not define the term "good faith," the Sixth Circuit has held that " § 1129(a)(3) expressly requires an inquiry into the debtor's motives in proposing the plan ...." Village Green I, GP v. Fed. Nat'l Mortg. Ass'n (In re Village Green I, GP) , 811 F.3d 816, 819 (6th Cir. 2016). "[T]he important point of inquiry is the plan itself and whether such plan will fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code." In re Madison Hotel Assocs. , 749 F.2d 410, 425 (7th Cir. 1984) ; see alsoTrenton Ridge , 461 B.R. at 468. One of the primary purposes of Chapter 11 is the preservation of the business as a going concern. SeeTrenton Ridge , 461 B.R. at 469. Another is the "maximization of the value of the estate." Id. (quoting In re Bonner Mall P'ship , 2 F.3d 899, 916 (9th Cir. 1993) ). In assessing whether the Debtors proposed the Plan in order to achieve a result consistent with the purposes of the Bankruptcy Code, the Court must examine the totality of the circumstances. SeeTrenton Ridge , 461 B.R. at 468–69. Considering the totality of the circumstances, the Court concludes that the Debtors have established by a preponderance of the evidence that they filed the Plan as part of their efforts to preserve their businesses as going concerns and to maximize the value of their estates and that they therefore have proposed the Plan in good faith. No party has contended otherwise.

C. Section 1129(a)(7)

Nor has any party argued that the Plan violates § 1129(a)(7), which provides that:

(a) The court shall confirm a plan only if all of the following requirements are met:

...

(7) With respect to each impaired class of claims or interests—

(A) each holder of a claim or interest of such class—

(i) has accepted the plan; or

(ii) will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date[.]

11 U.S.C. § 1129(a)(7)(A). This is the "best-interests-of-creditors test," under which each impaired class must either unanimously accept the Plan, or each holder of a claim within the class must receive under the Plan at least as much as the holder would have received in a Chapter 7 liquidation. Trenton Ridge , 461 B.R. at 473–74. Based on the Liquidation Analysis, the Court concludes that each holder of a claim in the impaired classes that did not unanimously accept the Plan would receive or retain under the Plan at least as much as the creditors would receive in a Chapter 7 liquidation. Indeed, the Liquidation Analysis established that in a Chapter 7 liquidation there would be no distribution to the holders of administrative expense claims (other than DIP Claims) or priority claims. By contrast, these claims are being paid in full under the Plan. The evidence also shows that secured creditors are receiving more than they would receive in a Chapter 7 liquidation. And although the unsecured creditors are receiving no distribution on their claims, that also would be true in a Chapter 7 liquidation of the Debtors' estates. For all these reasons, the Court concludes that the Debtors have demonstrated by a preponderance of the evidence that the Plan complies with § 1129(a)(7).

D. Section 1129(a)(11)

Under § 1129(a)(11), the Court may confirm a Chapter 11 plan only if "[c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed in the plan." 11 U.S.C. § 1129(a)(11). The requirement imposed by § 1129(a)(11) is known as the "feasibility" test for confirmation. Trenton Ridge , 461 B.R. at 478.

Here, the Debtors themselves are liquidating, and no one contends that Hatfield is a successor to the Debtors. Some courts "take a narrow approach and interpret the plain language of § 1129(a)(11) to say that feasibility need not be established when liquidation is proposed in the plan," while "[o]ther courts take a broader approach and apply the feasibility test to plans of liquidation, focusing their analysis on whether the liquidation itself, as proposed in the plan, is feasible." In re Heritage Org., L.L.C. , 375 B.R. 230, 311 (Bankr. N.D. Tex. 2007).

The Court concludes that the Plan is feasible. The Debtors have demonstrated that the Oak Grove Sale will occur and that all property of the Debtors' estates that is not distributed to holders of allowed claims on the Effective Date or conveyed to Hatfield under the Stalking Horse APA will be transferred to the Wind-Down Trust. In addition, the Plan Administrator charged with managing the Wind-Down will be appointed, distributions to beneficiaries of the Wind-Down Trust (creditors entitled to receive distributions under the Plan) will be made, and the Debtors' estates will be liquidated.E. Section 1129(b) and the Bay Point Objection

Bay Point, the sole member of Class 4, which is an impaired class, has rejected the Plan. In order to obtain confirmation over Bay Point's rejection of the Plan—known in bankruptcy parlance as a "cramdown"—the Debtors must establish two things: (1) that the Plan "does not discriminate unfairly" against Class 4; and (2) that the Plan is "fair and equitable" with respect to that class. 11 U.S.C. § 1129(b)(1). Bay Point contends that the Debtors have satisfied neither of these requirements. The Court begins with unfair discrimination.

1. Unfair Discrimination

A Chapter 11 plan may treat classes of claims "differently (discriminate) but not so much as to be unfair." In re Tribune Co. , 972 F.3d 228, 242 (3d Cir. 2020). "Unfair discrimination is rough justice. It exemplifies the Code's tendency to replace stringent requirements with more flexible tests that increase the likelihood that a plan can be negotiated and confirmed." Id. at 245. Although the Bankruptcy Code does not specify what constitutes unfair discrimination, "the focus of the inquiry ... [is] whether a plan segregates two similar claims or groups of claims into separate classes and provides disparate treatment for those classes." Future Energy Corp. , 83 B.R. at 493. That is, unfair discrimination can only be shown where similarly situated creditors are treated in a disparate manner. SeeTribune Co. , 972 F.3d at 232 (" ‘[D]iscriminate unfairly’ is a horizontal comparative assessment applied to similarly situated creditors ... where a subset of those creditors is classified separately, does not accept the plan, and claims inequitable treatment under it."). And "[u]nlike unsecured claims, every secured claim is different. Secured claims usually are secured by different collateral and usually have different priorities even if secured by the same collateral. This fact leads to the permissibility of individualized treatment based on the particularities of each secured claim." In re Am. Trailer & Storage, Inc. , 419 B.R. 412, 443 (Bankr. W.D. Mo. 2009) (quoting In re Buttonwood Partners Ltd. , 111 B.R. 57, 63 (Bankr. S.D.N.Y. 1990) ). Indeed, comparing the treatment of different classes of secured creditors for unfair discrimination purposes "is like comparing apples to oranges." Id. at 444.

Bay Point's unfair-discrimination objection is without merit and thus must be overruled for two reasons: First, Bay Point compares its Class 4 claim to wholly dissimilar unclassified claims. Second, there is no unfair discrimination between Bay Point's claim and the only remotely similar class of claims—Class 3—to which it compares itself.

Bay Point supports its unfair discrimination objection by comparing its treatment to the treatment of the holders of claims being satisfied through the issuance of notes under the New First Lien Facility and the New Second Lien Facility. The problem with this comparison is that Bay Point and these other claimants are not similarly situated. The New First Lien Facility and the New Second Lien Facility notes were issued in repayment of new money loans provided by MC Southwork and Murray Energy through debtor in possession financing and exit financing—liquidity that enabled the Debtors to retain employees, continue operations, and facilitate the Maple Eagle Sale and the Oak Grove Sale. Also, the DIP Claims that are being satisfied through the issuance of the New Second Lien Facility notes are unclassified claims. They were granted super-priority administrative expense status under the Final DIP Order, and unless the holders of these claims agreed otherwise, they would be entitled to receive cash equal to the allowed amount of their DIP Claims on the effective date of the Plan. See 11 U.S.C. § 364(c)(1) ; 11 U.S.C. § 1129(a)(9)(A) ; In re Mayco Plastics, Inc. , 379 B.R. 691, 707 (Bankr. E.D. Mich. 2008) ("[T]here is a post-petition indebtedness, fully authorized by the Court, and having a priority over and above all administrative expenses under § 364(c)(1), that has not been paid to the holder of the claim. ... The Debtor bears the burden of demonstrating how its plan can be confirmed absent payment in full of this § 364(c)(1) so-called ‘super priority’ claim and absent the consent of the holders of the claim[.]"). In sum, given the fact that the Bay Point Secured Claim and the claims being satisfied through the issuance of the New First Lien Facility and the New Second Lien Facility notes do not share the same priority under the Bankruptcy Code, they are not similarly situated creditors to which the unfair discrimination test applies.

Bay Point also contends that it is the victim of unfair discrimination because it is receiving an interest rate of 6.25% per annum while the interest rate on the New Third Lien Facility notes being issued to creditors in Class 3 is 8.5% per annum. But although both the New Third Lien Facility notes and the New Bay Point Secured Note are being issued in satisfaction of prepetition secured indebtedness, that is where the similarity ends. The allowed amount of Class 3 claims is approximately $169 million, which is more than 13 times the amount of Bay Point's Class 4 claim. Class 3 claimants are parties to the RSA and the Stalking Horse APA that were the foundations for the Debtors' Chapter 11 cases. And Class 3 claimants provided DIP financing and exit financing, without which the Debtors' businesses would have been forced to liquidate. "[T]he prevailing view is that a plan will not unfairly discriminate if there is ‘a rational or legitimate basis for discrimination and [if] the discrimination [is] ... necessary for the reorganization.’ " In re Dow Corning Corp. , 255 B.R. 445, 537–38 (E.D. Mich. 2000) (quoting In re Crosscreek Apartments, Ltd. , 213 B.R. 521, 537 (Bankr. E.D. Tenn. 1997) ), aff'd and remanded , 280 F.3d 648 (6th Cir. 2002). Based on the evidentiary record, the Court concludes that this is the case here.

Plus, in virtually every way other than the 2.25% interest rate differential, Bay Point is receiving more favorable treatment under the Plan than are the holders of claims being satisfied through the issuance of the notes under the New Third Lien Facility. The New Bay Point Secured Note will bear interest that is payable in cash in quarterly installments while the New Third Lien Facility notes are payable in kind at maturity. The New Bay Point Secured Note is entitled to receive fixed amortization in cash of 4% each quarter, resulting in at least 80% amortization at maturity, while the New Third Lien Facility has no fixed amortization. The New Bay Point Secured Note will share the ECT Payments pro rata with the New First Lien Facility, which would result in the New Bay Point Secured Note being amortized over 90% by maturity, leaving a balloon payment of only one million to two million dollars. And finally, the New Bay Point Secured Note has a maturity date that is three months earlier than the maturity date of the New Third Lien Facility. In short, when all the terms and conditions of the New Bay Point Secured Note and the New Third Lien Facility are taken into account, the Court cannot conclude that Bay Point is being treated less favorably. For all these reasons, Bay Point's treatment under the Plan does not amount to unfair discrimination within the meaning of § 1129(b)(1).2. Fair and Equitable Treatment

Finally, Bay Point contends that the Plan violates § 1129(b)'s fair and equitable requirement. As applied to a dissenting class of secured creditors, the fair and equitable requirement may be satisfied in several ways. The Debtors rely on the provision of the Bankruptcy Code under which a plan is deemed to be fair and equitable as to a class of secured claims that has rejected the plan if each member of the class retains its lien and receives "deferred cash payments totaling at least the allowed amount of [its] claim, of a value, as of the effective date of the plan , of at least the value of such holder's interest in the estate's interest in such property." 11 U.S.C. § 1129(b)(2)(A)(i)(II) (emphasis added). The phrase "value, as of the effective date of the plan" requires the application of an appropriate rate of interest so that the value of the payments received by the creditor over time equals the value of the creditor's interest in its collateral. "As the legislative history to section 1129 explains, Congress included this language to ‘recogniz[e] the time value of money,’ by requiring ‘a present value analysis that will discount value to be received in the future.’ " Unsecured Creditors' Comm. v. Strobeck Real Estate, Inc. (In re Highland Superstores, Inc.) , 154 F.3d 573, 580 n.10 (6th Cir. 1998) (citing H.R. Rep. No. 95-595, 1st Sess. 413 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6369). And, as the Supreme Court has stated, a creditor paid over time "receives the ‘present value’ of its claim only if the total amount of the deferred payments includes the amount of the underlying claim plus an appropriate amount of interest to compensate the creditor for the decreased value of the claim caused by the delayed payments." Rake v. Wade , 508 U.S. 464, 472 n.8, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993).

The question, then, is what interest rate the Plan must propose so that the stream of payments on the Bay Point Secured Claim equals the present value of Bay Point's collateral. Although § 1129(b) itself offers no clues as to the appropriate interest rate to be paid to confirm a Chapter 11 plan in the face of the rejection of the plan by a secured class, case law dictates the method for calculating the applicable rate.

In Till v. SCS Credit Corp. , 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004), the Supreme Court addressed the interest rate required to be paid to a secured creditor in a Chapter 13 case so that the property to be distributed to the creditor has a "value, as of the effective date of the plan" at least equal to the allowed amount of the creditor's claim. 11 U.S.C. § 1325(a)(5)(B)(ii). That is the same phrase used in § 1129(b)(2)(A)(i)(II), and the Till plurality found it "likely that Congress intended bankruptcy judges ... to follow essentially the same approach when choosing an appropriate interest rate" under § 1129(b)(2) and other provisions of the Bankruptcy Code that use the same language. Till , 541 U.S. at 474, 124 S.Ct. 1951. The approach adopted by the Till plurality is known as the formula approach. More on the formula approach later. But before discussing that approach, it is important to note that the Till plurality, while suggesting that Congress intended the phrase "value, as of the effective date of the plan" to have the same meaning in Chapter 11 and Chapter 13, also stated that "when picking a cramdown rate in a Chapter 11 case, it might make sense to ask what rate an efficient market would produce." Till , 541 U.S. at 476 n.14, 124 S.Ct. 1951.

Harmonizing these potentially conflicting signals, the Sixth Circuit has formulated a two-step approach to be used when determining the appropriate cramdown interest rate for a secured claim under a Chapter 11 plan. SeeBank of Montreal v. Official Comm. of Unsecured Creditors (In re Am. HomePatient, Inc.) , 420 F.3d 559 (6th Cir.2005). In American HomePatient , the Sixth Circuit held that "the market rate should be applied in Chapter 11 cases where there exists an efficient market" but that "where no efficient market exists for a Chapter 11 debtor, then the bankruptcy court should employ the formula approach endorsed by the Till plurality." Id. at 568 ; see alsoMomentive Performance Materials Inc. v. BOKF, N.A. (In re MPM Silicones, L.L.C.) , 874 F.3d 787, 800 (2d Cir. 2017) ("We adopt the Sixth Circuit's two-step approach, which, in our view, best aligns with the Code and relevant precedent."). The Debtors and Bay Point agree that an efficient market does not exist for the type of cramdown loan at issue in this case—that is, a five-year, term loan collateralized by the type of personal property (the Shields) that will secure the repayment of the New Bay Point Secured Note. Thus, under American HomePatient , the Court must apply the formula approach to determine the Cramdown Interest Rate.

To understand the formula approach, it is helpful to briefly consider the approaches that the plurality rejected along the way to adopting it—the coerced loan rate, the presumptive contract rate, and the cost of funds rate. The coerced loan approach looks to "evidence about the market for comparable loans to similar (though nonbankrupt) debtors," the presumptive contract approach "start[s] with the rate in the parties' pre-bankruptcy contract and allow[s] for potential upward or ... downward adjustments based on facts about the particular debtor and creditor," and the cost of funds approach considers "the particular creditor's own costs of borrowing to determine what the creditor would need to pay in order to obtain cash equal to 100% of its claim." In re Key Farms, Inc. , No. 19-02949-WLH12, 2020 WL 3445425, at *3 (Bankr. E.D. Wash. June 23, 2020) (citing Till , 541 U.S. at 477–80, 124 S.Ct. 1951 ). As explained below, Bay Point essentially urges the Court to determine the Cramdown Interest Rate using something akin to the coerced loan approach. In contrast to that approach and the other approaches rejected by the Till plurality, the formula approach "begins by looking to the national prime rate," which "reflects the market's estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for opportunity costs of the loan, the risk of inflation, and the relatively slight risk of default." Till , 541 U.S. at 478–79, 124 S.Ct. 1951. Here, the parties agree that the prime rate as of the date of the Confirmation Hearing was 3.25%. Under the formula approach, a bankruptcy court must "adjust the prime rate" based on the risk of nonpayment "[b]ecause bankrupt debtors typically pose a greater risk of nonpayment than solvent commercial borrowers." Id. at 479, 124 S.Ct. 1951. The next question is how the prime rate should be adjusted. As discussed below, courts make adjustments to the prime rate by considering several relevant factors, by doing so holistically, and by bearing in mind that an adjustment of 1% to 3% has generally been found to be sufficient to compensate for the risk of nonpayment.

Courts typically use the prime rate on the date of the confirmation hearing, see, e.g. , In re Turcotte , 570 B.R. 773, 784 (Bankr. S.D. Tex. 2017) ; In re Am. Trailer & Storage, Inc. , 419 B.R. 412, 438–39 & n.74 (Bankr. W.D. Mo. 2009), or the date the confirmation order is entered, seeIn re Prussia Assocs. , 322 B.R. 572, 591& n.15 (Bankr. E.D. Pa. 2005). The Turcotte court used the date of the confirmation hearing but stated that the rate would be adjusted if it had changed by the time the confirmation order was entered on the docket because it would consider that date to be the effective date of the plan, and the creditor was entitled to receive the value of its claim as of the effective date of the plan. SeeTurcotte , 570 B.R. at 784. Here, the Court need not decide whether the prime rate should be adjusted, because at all relevant times the prime rate has been 3.25%.

Addressing the factors to be considered, the Till plurality first stated that "[t]he appropriate size of th[e] risk adjustment depends ... on such factors as the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan." Id. It then noted that "the resulting ‘prime-plus’ rate depends only on the state of financial markets"—a factor accounted for by use of the national prime rate as the base rate —"the circumstances of the bankruptcy estate, and the characteristics of the loan[.]" Id. Taken together, these statements collectively can be reduced to four factors: (1) the circumstances of the bankruptcy estate, (2) the nature of the security, (3) the duration and feasibility of the reorganization plan, and (4) the characteristics of the loan. The plurality also appears to have endorsed the four factors identified by Justice Scalia in his dissent: "(1) the probability of plan failure; (2) the rate of collateral depreciation; (3) the liquidity of the collateral market; and (4) the administrative expenses of enforcement." Id. at 484, 124 S.Ct. 1951. But these are not four additional factors because the first of those—the probability of plan failure—overlaps with the plurality's "duration and feasibility of the reorganization plan" factor. And the second and third of Justice Scalia's factors—the rate of collateral depreciation and the liquidity of the collateral market—are coterminous with the plurality's "nature of the security" factor. So the factors mentioned by the plurality can be distilled to the four identified by it—(1) the circumstances of the estate; (2) the nature of the security; (3) the duration and feasibility of the reorganization plan; and (4) the characteristics of the loan—plus Justice Scalia's additional factor of (5) the administrative expenses of enforcement. Using both the plurality's and Justice Scalia's formulations in calculating the interest rate would be double counting. As explained later, Bay Point's expert, Lea, does just that.

See Richard B. Gaudet & Edward J. Peterson III, Un Till We Get It Right: Applying Finance Industry Standards to Cram-Down Rates , 90 Am. Bankr. L.J. 157, 159 (Winter 2016) ("[The Till plurality] selected the national prime rate as the more appropriate presumptive starting point or ‘base rate’ because it is readily available and ‘reflects the financial market's estimate of the amount a commercial bank should charge a creditworthy commercial borrower to compensate for the opportunity costs of the loan, the risk of inflation, and the relatively slight risk of default.’ " (quoting Till , 541 U.S. at 478–79, 124 S.Ct. 1951 ) (emphasis added)).

In analyzing these factors, "courts typically select a rate on the basis of a holistic assessment of the risk of the debtor's default on its restructured obligations." Wells Fargo Bank N.A. v. Tex. Grand Prairie Hotel Realty, L.L.C. (In re Texas Grand Prairie Hotel Realty, L.L.C.) , 710 F.3d 324, 334 (5th Cir. 2013). That is, it is unnecessary to assign a risk adjustment to each particular factor. SeeIn re LMR, LLC , 496 B.R. 410, 432–33 & n.12 (Bankr. W.D. Tex. 2013) ("[C]ourts typically select a cramdown rate based on a ‘holistic’ assessment of the risk of the debtor's default while evaluating several factors. The word ‘holistic’ means an analysis of the whole, rather [than] an analysis of its parts—which would seem to refute the notion that each risk factor must be assigned a specific percentage of increase to the prime rate." (citations omitted)).

Another guidepost is the fact that, as the Till plurality noted, "other courts have generally approved adjustments of 1% to 3%." Till , 541 U.S. at 478–479, 124 S.Ct. 1951. As the Fifth Circuit has pointed out, among the courts that follow Till 's formula method in the Chapter 11 context—as this Court must do under American HomePatient —risk-adjustment calculations have generally remained within the plurality's suggested range of 1% to 3%. SeeTexas Grand Prairie Hotel , 710 F.3d at 333 ("[T]he courts that follow Till 's formula method in the Chapter 11 context, ‘risk adjustment’ calculations have generally hewed to the plurality's suggested range of 1% to 3%."). And as one bankruptcy court put it, "the general consensus among courts is that a one to three percent adjustment to the prime rate is appropriate, with a 1.00% adjustment representing the low risk debtor and a 3.00% adjustment representing a high risk debtor[.]" In re Pamplico Highway Dev., LLC , 468 B.R. 783, 794 (Bankr. D.S.C. 2012) (footnote omitted); see alsoIn re Riverbend Leasing LLC , 458 B.R. 520, 535 (Bankr. S.D. Iowa 2011) ("[T]he general consensus that has emerged provides that a one to three percent adjustment to the prime rate as of the effective date is appropriate."); Prussia Assocs. , 322 B.R. at 591 ("The risk premium, per Till , will normally fluctuate between 1% and 3%."); Gary W. Marsh & Matthew M. Weiss, Chapter 11 Interest Rates After Till, 84 Am. Bankr. L.J. 209, 227–28 (2010) ("Generally, lower courts have adhered to Till 's broad guidelines concerning risk adjustments, creating a general spectrum on which a risk adjustment can be imposed. At the lower end, courts will apply a risk adjustment of roughly 1% where there is a low risk of non-payment on the Chapter 11 cramdown. ... Where there is an ‘intermediate’ risk of nonpayment by the debtors, bankruptcy courts have imposed a risk adjustment of roughly 1.5%.... Finally, where there is a significant risk of nonpayment by the debtor, bankruptcy courts are likely to approve higher risk adjustments."). This makes sense, because the Supreme Court stated in Till that if a bankruptcy court "determines that the likelihood of default is so high as to necessitate an ‘eye-popping’ interest rate, the plan probably [is not feasible and] should not be confirmed." Till , 541 U.S. at 480–81, 124 S.Ct. 1951 (citation omitted). Conversely, if a plan is feasible, then it would make little sense to impose an interest rate much higher than one calculated by starting with the prime rate and adding 1% to 3%.

It is also worth noting where the burden lies. "[I]f the debtor proposes a rate that would compensate the creditor for inflation risk and a relatively slight risk of default (i.e. , something approximating the prevailing prime rate), then the evidentiary burden of an upward risk-based adjustment should be on the creditor." In re Hockenberry , 457 B.R. 646, 655 (Bankr. S.D. Ohio 2011) ; Till , 541 U.S. at 479, 124 S.Ct. 1951 ("[S]tarting from a concededly low estimate and adjusting upward places the evidentiary burden squarely on the creditors[.]"); Gen. Elec. Credit Equities, Inc. v. Brice Road Devs., L.L.C. (In re Brice Road Devs., L.L.C.) , 392 B.R. 274, 280 (B.A.P. 6th Cir. 2008) (relying on Till to hold in a Chapter 11 case that "[i]t is [the creditor's] burden to demonstrate that a higher rate than that proposed by the Debtor is appropriate"); In re Griswold Bldg., LLC , 420 B.R. 666, 693 (Bankr. E.D. Mich. 2009) ("The evidentiary burden is on the creditors to establish the appropriate risk adjustment."). So here the evidentiary burden as to the appropriateness of the upward risk adjustment is borne by Bay Point.

The Plan provides that the New Bay Point Secured Note shall bear interest at the rate of 6.25% per annum. This 6.25% Cramdown Interest Rate is based on a 3% upward adjustment to the prime rate—a risk adjustment at the high end of the range suggested by the Till plurality. For the reasons explained below, the Court finds that Bay Point has failed to meet its burden of showing that a Cramdown Interest Rate higher than the 6.25% provided on the New Bay Point Secured Note is necessary for the Plan to satisfy § 1129(b)'s fair and equitable standard. In reaching this conclusion, the Court has considered the evidence presented at the Confirmation Hearing and assessed the demeanor and credibility of the witnesses who provided confirmation testimony. Overall, the Court finds the testimony of Moore and Matican to be very credible. And for the reasons detailed below, the Court did not find Lea's testimony to be at all persuasive.

Moore candidly acknowledged that he did not personally undertake an analysis of the risk of a default by Hatfield under the Plan. Tr. I at 87. Rather, based on the advice of his legal and financial advisors, he agreed "that the prime rate, plus ... three percent, was the appropriate rate, and that's how we established the six and a quarter percent [Cramdown Interest Rate]." Id. By agreeing to provide what he understood to be "the maximum rate," id ., or, more accurately, a risk adjustment at the high end of the Till plurality's recommended 1–3% risk range, Moore effectively conceded on behalf of the Debtors that Bay Point faces a material risk of default under the Plan. SeePamplico Highway Dev., LLC , 468 B.R. at 794 (noting that "the general consensus among courts is that ... a 3.00% adjustment represent[s] a high risk debtor"); In re Lilo Props., LLC , No. 10-11303, 2011 WL 5509401 at *2 (Bankr. D. Vt. 2011) ("The Court starts with the premise that ... the highest-risk debtors would pay prime plus 3%."). And the Debtors argue that by providing "an interest rate at the top level articulated by the ... Supreme Court [in Till ], and the [Sixth Circuit] in American HomePatient ," they have shown "that [the] [P]lan and the treatment accorded Bay Point is, indeed, fair and equitable, and should be confirmed." Tr. I at 53.

But Bay Point is not content to accept a Cramdown Interest Rate based on a risk adjustment at the top end of the Till plurality's recommended 1–3% range. Bay Point argues that it is entitled to more—indeed, much more. Relying primarily on Lea's expert testimony, Bay Point contends that an overall Cramdown Interest Rate of 14.5%—based on a whopping 11.25% upward risk adjustment to the prime rate—is required to compensate it for the risk of a future default by Hatfield on the New Bay Point Secured Note. In making this argument, Bay Point points out that: (1) "This is [Murray] Oak Grove's second trip through chapter 11 in less than two years;" (2) these Chapter 11 cases were filed "just ten months following the [Mission Acquisition];" and (3) "[Murray] Oak Grove ceased all operations in or around November 2019, and [gave] serious consideration ... for several months to, among other things, a permanent shutdown of portions of the Oak Grove Mine, and possible abandonment of the ... Shields underground." Bay Point Obj. at 6–7. Bay Point also asserts that the risk it faces is enhanced by the "unique nature of Bay Point's collateral," and the fact that the "significant costs to extract the ... Shields from the [Oak Grove Mine] and bring them to the surface ... [will] reduce[ ] the net value that might be realized from a disposition of the collateral if Bay Point is forced to bear those costs." Id. at 7. Based on these grounds, Bay Point argues that the proposed 6.25% Cramdown Interest Rate on the New Bay Point Secured Note "does not come anywhere close to providing Bay Point with the fair and equitable treatment required by section 1129(b)(2)(A)." Id. at 6.

As stated above, in contending that its treatment under the Plan is not fair and equitable Bay Point relies heavily on Lea's expert testimony—testimony that the Court did not find credible. While the reasons for discounting Lea's opinion regarding the appropriateness of the 6.25% Cramdown Interest Rate are myriad, it will suffice to focus on what the Court sees as its main deficiencies. For starters, Lea's conclusion that a 14.5% Cramdown Interest Rate (based upon a total upward risk adjustment to the prime rate of 11.25%) is required to compensate Bay Point for the risk of a future default is demonstrably at odds with his concession on cross-examination that the Business Plan is feasible and "has a 75 percent chance of succeeding." Tr. I at 203. In addition, Lea includes a subfactor in his Till Spreadsheet titled "Reasonableness of the Underlying Assumptions" under the broader heading titled "Feasibility of the Reorganization Plan." But Lea attributed no upward risk adjustment to this subfactor, commenting that the "Plan assumptions seem well reasoned and supported." Seesupra at 63. There is not a thread of logic connecting these irreconcilable conclusions, much less a bridge. Nor is there a logical nexus between the significant upward risk adjustments that Lea proposes and his glowing assessment of Hatfield's future management team, which he included in his expert report and confirmed in his live testimony. And what's more, by opining that a 14.5% Cramdown Interest Rate is called for while at the same time acknowledging that Hatfield's Business Plan is feasible and has a high probability of success, Lea ignores one of Till 's key tenets. The Till plurality made clear that if a bankruptcy court "determines that the likelihood of default is so high as to necessitate an ‘eye-popping’ interest rate," then the plan under review may well be infeasible and "probably should not be confirmed." Till , 541 U.S. at 480–81, 124 S.Ct. 1951 (citation omitted); see alsoAm. HomePatient , 420 F.3d at 569 (affirming bankruptcy court's determination that lenders were not entitled to the 12.16% interest rate they demanded, and noting that "[at] nearly eight percentage points higher than the 4.25% prime rate in effect on ... the date that the confirmation order was entered[,] ... the 12.16% rate appears to fall under the ‘eye-popping’ category described unfavorably by Till ").

Furthermore, Moore and Matican effectively rebutted much of Lea's testimony about the degree of financial risk that Hatfield—and, in turn, Bay Point—faces going forward. Lea made the following upward adjustments to the prime rate based on his application of the primary Till risk factors: (1) 4.75% for the duration and feasibility of the plan; (2) 2.25% for the circumstances of the estate; and (3) 4.25% for the nature of the security. Lea cited the following reasons for these large upward risk adjustments: (1) Metallurgical coal is a "dangerous industry" that involves the sale of a commodity subject to large fluctuations in market price; (2) the Debtors filed these cases less than a year after the Mission Acquisition and as recently as last summer considered shutting down the Oak Grove Mine; and (3) in the event of a future default by Hatfield, the Shields' high cost of extraction and low net realizable value creates a significant financial risk for Bay Point. While these concerns are not invalid, the confirmation testimony offered by Moore and Matican strongly suggests that they do not justify the 14.5% Cramdown Interest Rate that Bay Point proposes.

As for the risks posed by the industry, Matican testified that Lea's pessimistic assessment may be "appropriate for thermal coal," which he described as an "industry suffering from secular challenges." Tr. II at 38. But Matican stated that "met coal fundamentally is a completely different industry ... [that is] not suffering from decline." Id. He added that metallurgical coal "is used to produce steel, and there will always be steel demand. It could fluctuate, but ... [i]t's not an industry in secular decline. If anything, we're living in a world where developing economies are growing and building buildings and using more steel globally." Id. And in his testimony, Moore pointed out that the metallurgical coal price forecasts that were used in creating the Hatfield Projections and the Business Plan are based on a variety of well-respected, public and subscription-based sources, and "are generally lower than most of them." Moore Decl. ¶¶ 32–33. Matican also testified that Lea, in making his upward risk adjustments, overstated the effect of global financial markets, including the effect of trade wars with China and the COVID-19 pandemic, because such factors were already taken into account in the third-party metallurgical coal price forecasts that are set forth in the Moore Declaration and embedded in the Hatfield Projections. Tr. II at 42, 68.

Addressing the fact that the Debtors have recently considered the possibility of ceasing operations at the Oak Grove Mine, Moore testified that, after considering a variety of scenarios, "in the early to mid-June time frame, [the parties] started to coalesce around a plan to go forward." Tr. I at 75. And as Matican pointed out, "the ultimate decision [made] by MC Southwork was to contribute significant additional capital in the midst of this case, notwithstanding the unprecedented challenges presented by COVID." Tr. II at 64. According to Matican, this "just further demonstrates [MC Southwork's] commitment to this business, by increasing [its] level of commitment and ensuring that the restructuring had ample liquidity to be consummated and also committing additional capital for [Hatfield] to fund its operations." Id. In addition, Moore testified that the Oak Grove Mine is in a much better position today than it was following the Mission Acquisition due to capital investments (made to "improve the [mine's] slope belt capacity ... [and install] a dewatering system") and management's better understanding of the mining operation. Tr. I at 100–01.

Matican also pushed back against Lea's contention that significant upward risk adjustments are warranted based on the Shields' high extraction cost, and the low net value Bay Point would realize for its collateral in the event of a future default. According to Matican, the Hatfield Projections indicate that Hatfield will be able to make all payments required under the New Bay Point Secured Note. Tr. II at 35–36. Given this, Matican believes that the need for Bay Point to "tak[e] back collateral" is unlikely to materialize. Id. at 36. Matican added that MC Southwork will have a heavy incentive to ensure that the New Bay Point Secured Note remains a performing loan given the fact that it holds almost $165 million in prepetition claims, has contributed over $100 million in new capital and will have a substantial equity interest in Hatfield. Id. at 36–37, 87.

In the end, the Court finds the confirmation testimony offered by Moore and Matican to be highly persuasive. This testimony rebutted much of the factual predicate for Lea's opinions and undercut his overall conclusion that a Cramdown Interest Rate of 14.5% is necessary to compensate Bay Point for the risk of a future default by Hatfield on the New Bay Point Secured Note. And, moreover, it is worth questioning whether the concerns about Hatfield's financial future raised by Bay Point and its expert witness to support its proposed Cramdown Interest Rate are sincerely held or are merely being asserted for tactical advantage. The Court's skepticism is due to the far more rosy view of the Oak Grove Mine's future prospects that Bay Point expressed when it suited its purposes to do so in previous litigation between the parties. In the Bay Point Adversary Proceeding, Bay Point's counsel argued against any reduction in the value of the Shields based on economic obsolescence, stating: (1) "[L]ongwall mines are going to be the survivors in this industry;" (2) "the Oak Grove Mine has the best ... metallurgical coal in the world;" and (3) Hatfield's "plans for investment ... demonstrate without any real doubt, that this is a very, very viable operation." Adv. Pro. No. 20-1008, Doc. 28 (Transcript of 3rd Day of Trial Held 7/2/20) at 172–73. This sanguine view about the future of the metallurgical coal industry in general, and the Oak Grove Mine in particular, stands in stark contrast to the dire outlook Bay Point puts forth as a justification for its proposed 14.5% Cramdown Interest Rate.

Cross-examination also highlighted a number of other flaws—methodological and otherwise—in Lea's analysis. The first involves Lea's focus on "how a lender would price a loan" having terms like those set forth in the New Bay Point Secured Note. See Tr. I at 145–49, 212–15. Market pricing may have had some legal relevance under the now-discredited coerced loan approach. But the coerced loan approach was rejected by the Till plurality, and Bay Point concedes that an efficient market does not exist for the Cramdown loan at issue here. Lea's testimony about market pricing accordingly is of little value in this case—where the Court must determine whether the proposed Cramdown Interest Rate passes muster by applying Till 's prime-plus formula. Indeed, as the Till plurality explained, use of market-based lending rates in fixing cramdown rates "overcompensates creditors because the market lending rate must be high enough to cover factors, like lenders' transaction costs and overall profits, that are no longer relevant in the context of court-administered and court-supervised cramdown loans." Till , 541 U.S. at 477, 124 S.Ct. 1951.

Cross-examination also made clear that Lea did not use an accepted methodology in making the risk adjustments he applied in arriving at his proposed 14.5% Cramdown Interest Rate. Asked to explain the method he used, Lea responded that he relied on "some of the fundamental principles that are used by people and lenders to evaluate risk, which would be risk and reward, the principle of substitution, the principle of contribution, and the principle of absence." Tr. I at 125–26. These principles have been discussed in cases involving the appraisal and valuation of real estate and other forms of income-producing property. See, e.g. , Evans v. Cmty. Bank of Miss. (In re Evans) , 492 B.R. 480, 490 (Bankr. S.D. Miss. 2013) ("After reconciling the indicated value of the larger ... [p]roperty, ... [the appraiser] used the principle of contribution to arrive at a value for each of the smaller six (6) lots. The principle of contribution states that ‘the value of a particular component is measured in terms of its contribution to the value of the whole property or as the amount that its absence would detract from the value of the whole ....’ "); In re Majestic Star Casino, LLC , 457 B.R. 327, 355 (Bankr. D. Del. 2011) (finding that appraiser's testimony "that the investor would pay $200 million for something he could build for $100 million ... violates the principle of substitution upon which the cost approach is based"). Given Lea's training in commercial real estate valuation, it is not surprising that these concepts would inform his risk calculus. But Bay Point did not cite—and the Court's independent research did not reveal—a single decision in which the principles that formed the basis of Lea's opinions were either espoused by an expert witness or applied by a court in the context of a Till prime-plus analysis.

Furthermore, Lea admitted on cross-examination that the Risk Comments he included in his report were not supported by "a single citation to market data" and constituted "qualitative commentary." Tr. I at 199. This lends credence to Matican's observations that "Lea did not use a formal documented methodology" and that "[h]is adjustments were largely subjective, and not supported by underlying calculations or references to specific third-party data[ ] to support each of his underlying assumptions." Tr. II at 13–14. All in all, the analytical framework Lea used in making his risk adjustments appears to be self-created, and the conclusions drawn from it entirely subjective. SeeIn re Tara Retail Grp., LLC , 614 B.R. 215, 226 (Bankr. N.D. W. Va. 2020) (concluding that creditor's expert witness "did not have [an] objective rationale for his adjustment to the prime interest rate" and "view[ing] his testimony to be too subjective in the context of Till ").

In In re Capitol Lakes, Inc. , No. 16-10158, 2016 WL 3598536 (Bankr. W.D. Wis. 2016), the bankruptcy court took a secured creditor's expert witness to task for "us[ing] the same factors under more than one [ Till risk] category to multiply their effect." Id. at *1 ; see alsoGriswold Building , 420 B.R. at 694 (rejecting "a separate, additional 2% risk adjustment to reflect the nature of the security" due to absence of cash for tenant improvements because expert witness had already made a "2% risk adjustment regarding the circumstances of the [estate]" for the same reason). Lea also engages in double counting, and then some. He conceded on cross-examination that eight of the proposed upward adjustments set forth in his Till Spreadsheet—together resulting in a total upward adjustment of 7.5%—were impacted by the financial risk attributable to the costs Bay Point would incur in extracting the Shields from their underground location in the event of a future default by Hatfield. Some of those same risk adjustments and others (a total of nine) were based on the fact that Hatfield is in the coal industry, again, collectively resulting in a total upward adjustment of 7.5%. This is not just double counting; it is double counting by an order of magnitude. Lea also improperly magnifies the impact of his risk adjustments by adjusting for each of the factors identified in the Till plurality opinion plus those identified by Justice Scalia in his dissent, despite the substantial overlap between these factors. Not only that, but Lea also included an upward adjustment in his Till Spreadsheet for "The State of the Financial Markets" even though use of the prime rate as the base rate in the prime-plus formula accounts for that factor.

As justification for his opinion that a 14.5% Cramdown Interest Rate is required, Lea makes upward adjustments to the prime rate based on " Till Risk Factors" that find no support in the caselaw. In applying the primary Till risk factors—that is, "the circumstances of the estate, the nature of the security, and the duration and feasibility of the reorganization plan," Till , 541 U.S. at 479, 124 S.Ct. 1951 —some courts have formulated certain subfactors to help gauge the risk of a potential default by the debtor under the Chapter 11 plan. See, e.g. , In re Couture Hotel Corp. , 536 B.R. 712, 746 (Bankr. N.D. Tex. 2015) (quality of debtor's management); LMR , 496 B.R. at 430 (commitment of the debtor's owners); In re GAC Storage El Monte, LLC , 489 B.R. 747, 763 (Bankr. N.D. Ill. 2013) (loan-to-value ratio); In re San Francisco Med. Assocs., Inc. , No. 12-32859 HLB, 2013 WL 5529647, *3 (Bankr. N.D. Cal. 2013) (quality of any guarantors); In re 20 Bayard Views, LLC , 445 B.R. 83, 111–12 (Bankr. E.D.N.Y. 2011) (existence of an equity cushion); Am. Trailer & Storage, Inc. , 419 B.R. at 439 (collateral coverage); Prussia Assocs. , 322 B.R. at 591 (whether collateral is appreciating or depreciating). Lea takes several of those subfactors into account in his Till Spreadsheet, noting, for example, that Hatfield has "[s]ound management" and that it is "backed by [an] investment entity." But he also creates—apparently from whole cloth—and makes upward adjustsments for several subfactors that are not found in the body of decisional law interpreting Till . For instance, in the Till Spreadsheet Lea includes under the "nature of the security" risk factor the following subfactors: "Ability of the Debtor to Attract and Retain Customers" and "Ability of the Debtor to Attract Capital Investment or Asset Purchasers." And Lea adjusts the prime rate upward by 2.25% on account of those self-identified risk factors. Apart from the fact that these subfactors are of Lea's own making, the Court fails to see how either relates to the nature of Bay Point's security.

In the final analysis, Lea's testimony is not credible and is entitled to no weight. After hearing his testimony on direct and cross-examination, the Court was left with the distinct impression that Lea's Till analysis consisted of simply conjuring up a wide array of risk factors and making an upward adjustment for as many as possible—all in an attempt to support the "eye-popping" 14.5% Cramdown Interest Rate he proposes. SeeCapitol Lakes , 2016 WL 3598536, at *1 (rejecting opinion offered by secured creditor's expert witness in support of its challenge to debtor's proposed cramdown interest rate because "testimony and analysis appeared to be facile and predirected to a result"). Make no mistake, the risk of a future default by Hatfield on the New Bay Point Secured Note is not insignificant. To account for that risk, the Debtors offer Bay Point a 3% upward adjustment to the prime rate—a risk adjustment at the high end of the range suggested by the Till plurality. Facing a competitive marketplace and the economic headwinds created by the COVID-19 pandemic, Hatfield will undoubtedly encounter challenges ahead. But having conducted its own "holistic assessment of the risk of ... [a] default [by Hatfield] on [the New Bay Point Secured Note]," Texas Grand Prairie Hotel , 710 F.3d at 334, the Court concludes that the proposed Cramdown Interest Rate of 6.25% is sufficient to compensate Bay Point for that risk. Put differently, the deferred payments Bay Point will receive under the New Bay Point Secured Note, when discounted to present value by applying the 6.25% Cramdown Interest Rate, equal the allowed amount of the Bay Point Secured Claim. The Plan accordingly complies with § 1129(b)(2)(A)(i)(II) of the Bankruptcy Code and, thus, is fair and equitable.

In applying Till 's prime-plus formula, some bankruptcy courts have required adjustments to the prime rate outside this 1–3% range. See, e.g. , Couture Hotel Corp. , 536 B.R. at 746–47 (3.5% upward risk adjustment to the prime rate was appropriate due to management shortcomings and impediments to foreclosure arising from fact that a portion of the property securing the loan was located in a foreign jurisdiction); CRE/ADC Venture 2013, LLC v. Rocky Mountain Land Co., LLC (In re Rocky Mountain Land Co., LLC) , No. 12-21643 HRT, 2014 WL 1338292 at *15 (Bankr. D. Colo., Apr. 3, 2014) (3.75% upward risk adjustment appropriate where secured creditor with lien on commercial office building would receive interest-only payments for seven years followed by a balloon payment, questions existed as to plan's feasibility, and one of the primary tenants had below-market lease); Griswold Bldg. , 420 B.R. at 693–704 (5% upward risk adjustment to the prime rate required where court found that plan was not feasible, a substantial portion of loan was unsecured, and plan did not provide for equity contributions or funds for either tenant alterations or leasing commissions). The considerations that warranted risk adjustments over and above the high end of the Till plurality's suggested 1–3% range in the above-cited cases are not present here.

V. Conclusion

For all these reasons, the UST Objection, the Funds Objection and the Bay Point Objection are overruled and the Plan is confirmed.

In re Murray Metallurgical Coal Holdings

Opinion

OPINION ON CONFIRMATION OF THE DEBTORS' THIRD AMENDED CHAPTER 11 PLAN (DOC. 691)

Table of Contents

I. Introduction

II. Jurisdiction and Constitutional Authority

III. Factual and Procedural Background

A. The Debtors' Corporate Structure

B. The Debtors' Business

C. The Mission Coal Acquisition

D. Events Leading to the Debtors' Chapter 11 Filings

E. The Debtors' Prepetition Capital Structure

F. The RSA

G. Significant Events in the Chapter 11 Cases

1. DIP Financing

2. The Critical Vendor Dispute

3. Appointment of the Committee

4. The Maple Eagle Sale

5. The Oak Grove Sale

6. The Bay Point Litigation

a. Valuation of Bay Point's Collateral

b. Bay Point's § 1111(b) Election

7. Filing of the Plan and Disclosure Statement

H. Sources of Plan Funding

I. The Structure of the Plan

1. Unclassified Claims

2. Classification and Treatment of Claims and Interests

a. Non-Voting Classes

c. Class 4—Bay Point Secured Claim

3. The Wind-Down Trust and Plan Administrator

4. Treatment of Avoidance Actions

5. The Exculpation Clause

J. Exit Capital Structure

K. The Confirmation Hearing

L. Confirmation Testimony

1. Robert D. Moore

Id.

Hatfield Unaudited Projected Income Statement

2. Franklind Lea

Id.

3. Jeremy Matican

Id.

IV. Legal Analysis

A. Section 1129(a)(1)

1. The UST Objection

2. The Funds Objection

a. The Oak Grove Avoidance Actions Are Property of the Estate.

i. Section 541(a)(1)

ii. Sections 541(a)(3) and (a)(4)

iii. Section 541(a)(7)

iv. Abandonment

b. The Sale of the Oak Grove Avoidance Actions Benefits the Debtors' Estates.

c. The Debtors May Sell Their Contingent Interest in the Proceeds of the Oak Grove Avoidance Actions.

B. Section 1129(a)(3)

C. Section 1129(a)(7)

D. Section 1129(a)(11)

1. Unfair Discrimination

V. Conclusion

IT IS SO ORDERED.

In re Murray Metallurgical Coal Holdings

In re Murray Metallurgical Coal Holdings

Case Details

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