Washington, DC/Ashland, KY (September 28, 2004) – The critical role played by labor negotiations in a large-scale restructuring and acquisition is underscored in the sale of $786 million in assets of former coal producer Horizon Natural Resources Co., expected to close this week.
On September 29, Horizon, which filed for bankruptcy in November 2002, will complete the sale of its assets to an investment consortium led by Wilbur Ross Holdings.
The transaction would likely not have occurred had attorneysfrom Venable LLP, acting as special labor counsel for the bankrupt estate, not been able to obtain approximately $800 million in relief from labor and long-term pension and health care obligations. The elimination of these liabilities was approved in a decision on August 6 issued by the U.S. Bankruptcy Court for the Eastern District of Kentucky.
“The Bankruptcy Code affords a business with overwhelming short- and long-term labor costs the opportunity to resurrect the value of its assets” said Venable labor partner David Smith, who led the negotiations with Horizon’s key union.
Venable’s Labor Group, utilizing Section 1113 and Section 1114 of the U.S. Bankruptcy Code, developed a collective bargaining strategy and timetable for the purpose of either obtaining a concessionary agreement with the relevant union or positioning the Debtor-In-Possession to obtain significant relief from the court. Following intense and complex union negotiations, a petition was filed with the Bankruptcy Court to relieve Horizon’s ten unionized subsidiaries of obligations under their individual labor contracts and statutory retiree health care benefits.
The Bankruptcy Court granted the petition in full by authorizing rejection of all of the collective bargaining agreements and termination of the retiree medical benefits paid directly by these companies. The decision was significant in that the court embraced an important legal theory favorably reconciling two competing federal statutes.
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