November 12, 2020 – The Court hearing the Hopedale Mining cases has extended the periods during which the Debtors have an exclusive right to file a Chapter 11 Plan and solicit acceptances thereof, through and including March 19, 2021 and May 18, 2021, respectively [Docket No. 516]. Absent the relief, the Plan filing and solicitation periods were scheduled to expire on November 19, 2020 and January 18, 2021, respectively.

According to the extension motion [Docket No. 498], the Debtors have reached a second settlement with the Official Committee of Unsecured Creditors appointed for its cases and Prepetition Lenders and DIP Lenders Colbeck Strategic Lending Master, L.P. (“Colbeck”) and CION Investment Corporation (“CION”) that resolves potential claims against the Debtors' Prepetition Secured Parties, which the Committee unearthed in an investigation surrounding the proper perfection of liens and the calculation of the Prepetition Secured Parties' claims. The settlement also clears up uncertainty surrounding how the Debtors will wrap up their Chapter 11 cases, as the agreement will form the basis of a to-be-filed Plan.

Settlements

The settlement motion [Docket No. 483] explains: "The Committee asserted that the Prepetition Secured Parties failed to properly perfect their alleged security interests in certain of the Debtors’ assets including motor vehicles; certain real properties; certain cash in bank accounts; and certain commercial tort claims, thereby making such alleged security interests unperfected and avoidable pursuant to 11 U.S.C. § 544(a). The Committee challenged the allowability of certain components of the Prepetition Secured Parties’ claims, including unused line fees, make whole claims, origination fees, exit fees and consent fees totaling at least $7,122,981.67 plus interest.

After the Committee notified the Prepetition Lenders of its Initial Challenges, the Committee and the Prepetition Lenders engaged in substantial negotiations regarding the merits of the Committee’s challenges, the Debtors’ proposed sale of substantially all of their assets to the Stalking Horse Bidder, which was comprised of the Prepetition Secured Parties and the DIP Secured Parties (or their assignees and designees) (as ultimately consummated, the 'Sale'), the consideration that the Debtors’ estates would receive in connection with the Sale and various related matters. Those negotiations resulted in the first settlement between the Committee, the Prepetition Secured Parties and the DIP Secured Parties (the 'First Settlement')….

Through its investigation, the Committee identified several claims and challenges that, absent a settlement, it intended to file against the Prepetition Secured Parties. Rather than litigate the matter and expend fees that these estates cannot easily bear, the Committee, the Prepetition Secured Parties, the DIP Secured Parties and the Debtors have been involved in extensive negotiations to seek a resolution of the Committee’s claims. The Parties engaged in multiple telephone conversations over several weeks in an effort to resolve this matter consensually. Those efforts were hard-fought at arms’ length and culminated in the [second] Settlement Agreement."

Under the second settlement, the Prepetition Lenders have agreed to transfer to the Debtors’ estates (a) $400,000 in cash no later than 3 business days after entry of the Bankruptcy Court’s order approving the Settlement Agreement (the “Initial Settlement Payment”) and (b) solely to the extent a Plan containing specified conditions is confirmed by the Bankruptcy Court, $100,000 in cash on the effective date of such Plan (such amount, together with the Initial Settlement Payment, the "Settlement Payment”). 

In addition, the Prepetition Lenders will receive 50% of all net recoveries paid to general unsecured creditors until the Prepetition Lenders recover an amount equal to the amount of the Settlement Payment (the “Settlement Payment Recovery Amount”), whether such amount is recovered under a Plan, in a case under chapter 7 or otherwise.

The extension motion states, “Since the entry of the Sale Order, and as discussed on the record at the hearing held before this Court on October 13, 2020, the Debtors have been focusing on the best path forward in connection with these Chapter 11 Cases while being mindful of estate resources and potential recoveries to creditors. During this time, the Debtors, the Committee, the Prepetition Lenders and the DIP Lenders have reached a global resolution…The Debtors believe that this is the best path forward for these Chapter 11 Cases, and the Debtors intend to seek confirmation of a joint Plan with the Committee as promptly as possible. However, the current Exclusivity Periods will likely expire before the Debtors and the Committee will be able to confirm a Plan. Therefore, out of an abundance of caution, the Debtors seek a brief but reasonable extension of the Exclusivity Periods to allow the Debtors to effectuate the Lender Settlement and to seek confirmation of a Plan.”

About the Debtors

According to the Debtors: “Rhino Resource Partners LP is a diversified energy limited partnership that is focused on coal and energy related assets and activities, including energy infrastructure investments. Rhino produces metallurgical and steam coal in a variety of basins throughout the United States.”

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