WHEN DETAILED ANALYSIS AND FOCUSED ACTION CAN PROTECT CREDITORS—AND JOBS

Overview

  • In 2019, coal demand plunged, triggering a severe liquidity squeeze at Murray Energy Holdings, the largest private coal producer in the U.S.
  • Creditors needed a clear plan of action based on thorough understanding of the company’s strategic and financial position to protect their interests—and 5,500 jobs
  • AlixPartners helped evaluate the company’s business plan and liquidity needs and negotiate a global settlement

The Murray Energy case demonstrates how AlixPartners’ analytical rigor helps companies set the stage for lasting success

THE SITUATION: PLUNGING DEMAND TRIGGERS A CASH CRUNCH

In 2019, Murray Energy Holdings, the largest private coal producer in the United States, operated 13 mines in Appalachia, the Illinois Basin, and the Uintah Basin, producing approximately 53 million tons of thermal coal in 2018 and employing nearly 5,500 people. Murray Energy also managed five additional mines in the Illinois Basin through its controlling interest in Foresight Energy, which it acquired in 2015.

A downturn in the coal market left Murray Energy scrambling for liquidity in 2019. The cash crunch, coupled with the company’s high debt service costs, obligations under its union contract, and contributions to a multi-employer pension fund, drove the company to file for Chapter 11 that October. Coal demand declined further while the company was under bankruptcy court protection, as the COVID-19 lockdown and mild winter temperatures curtailed energy demand.

AlixPartners was retained as financial advisor to the Official Committee of Unsecured Creditors (the “UCC”), assisting the committee in meeting its obligations and making decisions on its behalf.

THE APPROACH: DETAILED ASSESSMENTS DRIVE THE SHAPING OF A RESCUE PLAN

As advisor to the UCC, AlixPartners participated in key moves during Murray’s time under court protection, including:

  1. Analyzing and challenging multiple iterations of Murray Energy’s business plan for reasonableness and feasibility, in view of dramatic swings in thermal coal demand during the period in question.
  2. Evaluating and analyzing Murray Energy’s cash-flow projections and proposed DIP facility, undertaking an assessment of first-day motions to determine the benefit of each motion to the estate and unsecured creditors, and assessing the feasibility of the proposed post-emergence capital structure and exit financing needs.
  3. Supporting UCC counsel’s investigation of certain pre-petition transactions.
  4. Participating in negotiations of the reorganization plan and associated global settlement.

THE SOLUTION: RIGOROUS ANALYSIS PROPELS THE EMERGENCE OF A STRONGER BUSINESS

The AlixPartners team provided support when it really mattered, helping negotiate a successful reorganization plan and global settlement that enabled Murray Energy to emerge from Chapter 11 in September 2020.

AlixPartners’ input was instrumental in preserving the company as a going concern, saving thousands of jobs, ensuring payment of approximately $150 million in pre-petition vendor claims, and positioning the company for success with a far stronger balance sheet.

The case was the winner of a 2021 TMA Turnaround and Transaction Award in the category of “2021 Mega Turnaround / Transaction of the Year.”

when it really matters alixpartners 2019

WHEN IT REALLY MATTERS: EBITDA IMPROVEMENT IN SEVEN MONTHS—AND A HIGHLY PROFITABLE EXIT IN FIVE YEARS

The performance improvement achieved at our client’s newly acquired portfolio company—an $11 million increase in annual EBITDA in just seven months—speaks volumes about the importance of implementation planning early in the investment game.

  • The outcomes of this case show how AlixPartners’ approach is distinctive in other respects as well. Specifically:
  • We support our PE clients throughout all stages of the investment lifecycle, including pre-transaction, pre-close planning, value creation, and achievement of full potential. 
  • We help clients with crisis management in all stages of the lifecycle—such as determining how to turn around a target that’s in bankruptcy or getting a struggling transformation program back on track at a newly acquired business.
  • We identify, drive, and help secure sustainable improvements in portfolio companies’ performance.
  • We work side-by-side with PE sponsors and their portfolio companies’ management teams to ensure that deals deliver the intended value. 

Our unique approach enabled this client to quickly restore their distressed portfolio company’s EBITDA performance to levels that attracted a buyer willing to pay a handsome price—one that nearly doubled the investment value at exit.

The performance improvement achieved at our client’s newly acquired portfolio company—an $11 million increase in annual EBITDA in just seven months—speaks volumes about the importance of implementation planning early in the investment game.

  • The outcomes of this case show how AlixPartners’ approach is distinctive in other respects as well. Specifically:
  • We support our PE clients throughout all stages of the investment lifecycle, including pre-transaction, pre-close planning, value creation, and achievement of full potential. 
  • We help clients with crisis management in all stages of the lifecycle—such as determining how to turn around a target that’s in bankruptcy or getting a struggling transformation program back on track at a newly acquired business.
  • We identify, drive, and help secure sustainable improvements in portfolio companies’ performance.
  • We work side-by-side with PE sponsors and their portfolio companies’ management teams to ensure that deals deliver the intended value. 

Our unique approach enabled this client to quickly restore their distressed portfolio company’s EBITDA performance to levels that attracted a buyer willing to pay a handsome price—one that nearly doubled the investment value at exit.

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