December 18, 2018 Read More →

Union, trustee question Westmoreland bankruptcy plan

S&P Global Market Intelligence ($):

A bankruptcy court should deny Westmoreland Coal Co.’s request to employ management consulting firm McKinsey Recovery & Transformation Services U.S. LLC during its Chapter 11 proceedings because McKinsey “patently lacks disinterestedness,” a U.S. trustee recommended.

Henry Hobbs Jr., the acting U.S. trustee for the southern and western districts of Texas, said in a Dec. 14 filing that McKinsey’s application withheld critical details about its connections to interested parties, including one that generates 17.5% of McKinsey’s gross annual revenue. The firm also failed to complete a conflicts check for hundreds of interested parties and is in violation of the U.S. bankruptcy code’s disinterested person requirement because it holds a $96,000 claim against Westmoreland, Hobbs wrote.

The U.S. Bankruptcy Court for the Southern District of Texas, which is handling Westmoreland’s bankruptcy, requested the trustee’s recommendation after a rival consulting firm challenged Westmoreland’s application.

The United Mine Workers of America, or UMWA, filed another objection in Westmoreland’s bankruptcy proceedings, this time calling the company’s proposed employee retention plan “unfair and discriminatory.” Westmoreland filed for Chapter 11 bankruptcy protection in October and is seeking court approval to pay about $1.5 million quarterly to retain 243 of its “valued employees,” according to the proposed plan, which was filed Nov. 26.

The union, which represents about a quarter of Westmoreland’s 1,700 employees, wrote in a Dec. 14 filing that the plan “is designed to provide extraordinary bonuses to management-level employees only and is not tailored to debtors’ purported goal to keep its critical workforce intact until the proposed sale process is complete.”

Phil Smith, spokesman for the UMWA, said in an email that Westmoreland’s plan “follows the same playbook” that other coal producers used during their bankruptcy proceedings, citing Patriot Coal Corp., Walter Energy Inc. and Alpha Natural Resources Inc. “The truth is that these companies use the bankruptcy system to enrich corporate executives at the expense of workers and retirees,” Smith said. “It is yet another legal scheme to transfer wealth to the already-wealthy while leaving working families further behind.”

More ($): Trustee asks court to reject Westmoreland Coal’s pick for bankruptcy adviser

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