Document Page 1 of 7 UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION In re: ALPHA NATURAL RESOURCES, INC. et al., Debtors. Case No. 15-33896-KRH Chapter 11 and says: DECLARATION OF DAVID MACGREEVEY IN SUPPORT OF THE MOTION OF THE OFFICIAL COMMITTEE OF RETIRED EMPLOYEES OF ALPHA NATURAL RESOURCES, INC. TO (A) APPROVE THE CREATION OF A VEBA, (B) AUTHORIZE POSSESSION OF FUNDS, (C) AUTHORIZE ASSIGNMENT/TRANSFER OF RIGHTS AND (D) GRANT RELATED RELIEF I, DAVID MACGREEVEY, being duly sworn according to law, upon his oath, deposes 1. I am a managing director of the firm Zolfo Cooper, LLC ( Zolfo Cooper ), a New Jersey limited liability company. The information included in this declaration is based upon my personal knowledge. 2. The Official Committee of Retired Employees (the Retiree Committee ) in the above referenced bankruptcy cases selected Zolfo Cooper as its financial advisor, and I am Lynn Lewis Tavenner, Esquire (Va. Bar No. 30083) Paula S. Beran, Esquire (Va. Bar No. 34679) David N. Tabakin, Esquire (Va. Bar No. 82709) Tavenner & Beran, PLC 20 North Eighth Street, Second Floor Richmond, Virginia 23219 Telephone: (804) 783-8300 Telecopy: (804) 783-0178 Counsel for The Official Committee of Retired Employees 1 John R. Owen, Esquire (admitted pro hac vice) Jeremy D. Capps, Esquire (admitted pro hac vice) Melissa Y. York, Esquire (Va. Bar No. 77493) Harman, Claytor, Corrigan & Wellman P. O. Box 70280 Richmond, Virginia 23235 Telephone: (804) 747-5200 Telecopy: (804) 747-6085 Counsel for The Official Committee of Retired Employees
Document Page 2 of 7 authorized to make this declaration on behalf of the Retiree Committee in support of the Motion of the Official Committee of Retired Employees of Alpha Natural Resources, Inc. to (A) Approve The Creation of a VEBA, (B) Authorize Possession of Funds, (C) Authorize Assignment/Transfer of Rights; and (D) Grant Related Relief ( VEBA Motion and/or Motion ). 1 ECF No. 3061. QUALIFICATIONS 3. I hold a B.S.B.A. in Accounting from the University of Richmond and have significant expertise in complex restructurings and strategic transactions, which have been my primary professional focus for the past approximately sixteen years. During such time I have advised on more than fifty complex transactions across a variety of industries and on behalf of various interests, including official retiree committees, official creditor committees, management teams, boards of directors, lenders and investors. I currently lead Zolfo Cooper s Creditor Services Practice, which is focused on advising official committees and which has extensive mining sector experience. I personally have advised the official committees of retired employees of Kodak, AMR (American Airlines), and Patriot Coal. I also recently served as an advisor for the United Mine Workers of America in the Walter Energy bankruptcy cases. 4. I joined Zolfo Cooper in 2000 and prior to re-joining the firm in 2011, I spent ten years at Chanin Capital Partners and Macquarie Capital where I served as a senior vice president in each firm s restructuring and special situations group. Prior to that, I worked in the assurance and advisory group at Ernst & Young. 5. Zolfo Cooper is a leading independent provider of restructuring, financial, and corporate advisory solutions. Zolfo Cooper s expert teams provide the highest quality advice and 1 Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the VEBA Motion. 2
Document Page 3 of 7 support to companies and their stakeholders facing a wide range of financial, operational and strategic challenges. With offices and affiliations in the world s leading financial centers, Zolfo Cooper assists clients both locally and internationally to deliver solutions spanning the middlemarket to the largest and most complex cross-border situations. In addition to many other industries, Zolfo Cooper has substantial experience in the mining sector and has recently advised retirees, employees, creditors and companies on significant mining industry restructurings, including Peabody Energy, Foresight Energy, Patriot Coal, Walter Energy, Xinergy, James River Coal, Oxford Resource Partners, Allied Nevada Gold Group, and Mineral Park Mine. BACKGROUND 6. By the VEBA Motion, the Retiree Committee seeks entry of an order from the Court, (a) approving the creation of a VEBA, (b) authorizing possession of funds, (c) authorizing the assignment/transfer of rights; and (d) granting related relief. The Motion should be granted for many reasons including, but not limited to, the following: ADDITIONAL FACTS IN SUPPORT 7. On November 3, 2015, the Debtors filed their Motion, Pursuant to Section 363 of the Bankruptcy Code, for an Order Authorizing Debtors to Terminate Certain Unvested 2 Non- Pension Benefits ( Retiree Benefits Termination Motion ). ECF No. 797. The Debtors sought entry of an order authorizing them to terminate, effective December 31, 2015, certain benefits they claimed were unvested, non-pension welfare benefits (e.g., hospital, medical, prescription, surgical and life insurance) (collectively, the Non-Pension Retiree Benefits ) currently offered to 2 The wording simply recites title of the Retiree Benefits Termination Motion and is not a concession or admission by the Retiree Committee. 3
Document Page 4 of 7 certain of the Debtors 4,580 non-union retirees and spouses (collectively, the Non-Union Retirees ). 8. Several interested retired employees filed a response to the Retiree Benefits Termination Motion, asking that the Court enter an order appointing an official retiree committee pursuant to 11 U.S.C. 1114 and establishing a briefing schedule that would allow the parties to adequately address the Debtors Retiree Benefits Termination Motion. ECF No. 877. A separate Motion to Appoint Official Retiree Committee Pursuant to 11 U.S.C. 1114 was also filed. ECF No. 868. The Court heard oral argument on that motion on November 17, 2015, at which time it granted the motion, and directed the Office of the United States Trustee for the Eastern District of Virginia (the U.S. Trustee ) to appoint an official retiree committee. ECF No. 970. The U.S. Trustee appointed the Retiree Committee on December 1, 2015. ECF No. 1017. 9. After (a) the filing of Retiree Benefits Termination Motion and (b) its appointment, the Retiree Committee engaged in substantial efforts to investigate the proposed termination of the Non-Pension Retiree Benefits at issue. The Debtors asserted that all Non-Union Retiree Non- Pension Retiree Benefits at issue were not vested and were subject to unilateral termination. Pursuant to the Debtors position as articulated in the Retiree Benefits Termination Motion, a significant portion of the Debtors Non-Union Retirees were in danger of losing health insurance benefits through these Bankruptcy Cases. The Retiree Committee disagreed with the Debtors assertions and began the process to litigate the matters before this Court. 10. The Retiree Committee also attempted to find solutions whereby Retiree Benefits could be maintained in a manner that allowed the Debtors to successfully reorganize. This process included, among other things, discussions with the Debtors. When negotiating with the Debtors 4
Document Page 5 of 7 and others, the Retiree Committee maintained and expressed its goal of maximizing the overall monetary value of any resolved settlement without regard to maintenance of any particular welfare plan. Throughout this period and as of the execution of this Declaration, the Non-Union Retiree Non-Pension Retiree Benefits continued notwithstanding that the Debtors had initially sought to terminate as of December 31, 2015. 11. The Retiree Committee ultimately resolved its issues in a manner that the Retiree Committee determined was the best possible result under the circumstances for its constituents. 12. On July 5, 2016, the Debtors filed with this Court the Non-Union Retiree Settlement Stipulation, which reflected the agreed upon settlement of the dispute between the Retiree Committee, the Debtors and others. ECF. No. 2927. On July 12, 2016, this Court entered the Confirmation Order, which fully incorporates the Non-Union Retiree Settlement as approved by the Court and provides a mechanism to effectuate. ECF No. 3038. Thereafter, the Court entered an order approving the Non-Union Retiree Order. ECF No. 3051. The Non-Union Retiree Order, in part, provides $3.0 million to be paid by NewCo within 10 business days after the later of the Effective Date or the Debtors receipt of the Notice; $3.0 million to be paid by NewCo on January 1, 2017; $3.5 million to be paid by NewCo on January 1, 2018; $2.5 million to be paid by NewCo on January 1, 2019; and $1.0 million to be paid by NewCo on January 1, 2020. See VEBA Motion, Ex. B at Par 4. The Non-Union Retiree Order further provides that as soon as practicable following the entry of this Stipulation and Order, the Retiree Committee shall: (a) establish a VEBA within the meaning of section 501(c)(9) of the U.S. Internal Revenue Code of 1986, as amended (the IRC ); and (b) provide the Debtors, NewCo and/or the First Lien Lenders (where applicable) with a Notice that (i) the Retiree Committee has established the VEBA and (ii) the 5
Document Page 6 of 7 VEBA can accept contributions made as instructed therein. See VEBA Motion, Ex. B at Par. 3. The Non-Union Retiree Order also provides that the Retiree Committee shall establish the VEBA solely for the benefit of the Debtors eligible Non-Union Retirees who are receiving, or have fulfilled all necessary requirements for eligibility to receive, Retiree Benefits as of the Effective Date other than the Retained Benefits and the Life Insurance Plans. See VEBA Motion, Ex. B at Par. 3. 13. During the course of negotiations with the Debtors, it became apparent that any resolution would not include the continuation of all Non-Pension Retiree Benefits. It was also apparent that the Debtors did not desire to administer all payments that may result from a potential resolution. Based on the same, the Retiree Committee requested extensive information about the affected Non-Union Retirees from the Debtors to design a fair and equitable welfare plan to cost effectively provide said benefits. Upon receipt of certain requested information from Debtors and upon agreement of the terms of the Non-Union Retiree Order, the Retiree Committee, through its professionals, drafted (and continues to revise) documents for the creation of a VEBA to serve as a mechanism for the Debtors, the Reorganized Debtors, and/or NewCo to provide the negotiated obligations to its retirees reflected in the Non-Union Retiree Order and Confirmation Order. Upon this Court s approval, the Retiree Committee intends on adopting a VEBA Trust Agreement in substantially the same form as the VEBA Trust Agreement. 14. The amount of funds expected to be received by the VEBA is less than the amount of Non-Pension Retiree Benefit subsidies that the Debtors would have provided to the Non-Union Retirees for the same period absent approval of the Retiree Benefits Termination Motion. Creating replacement healthcare plans was not financially feasible, and a mechanism was required to ensure 6
Document Page 7 of 7 those impacted the most would have at least some access to subsidized healthcare. Accordingly, pursuant to the VEBA Trust Agreement, the funds obtained by the Trust will be used to provide reimbursements to certain affected Non-Union Retirees, including eligible spouses, surviving spouses, and/or dependents. 15. It is the intention of the Retiree Committee that funds obtained by the VEBA will be provided to those being impacted the most and in a manner that provides benefits on a tax free basis. 16. The VEBA is to be governed by the VEBA Trustees, initially appointed by the Retiree Committee. The VEBA Trustees shall initially consist of the following three (3) named members: (A) (B) (C) Eddie W. Neely, Chairperson; Randy L. McMillion; and Waiting on confirmation of third member. 17. The VEBA terms have been drafted to provide flexibility to the VEBA Trustees for the long-term implementation of its goals. 18. The Retiree Committee intends to have the VEBA operational shortly after (a) the Motion is approved by this Court and (b) the VEBA Trust Agreement is executed. Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct to the best of my knowledge and belief. Dated: July 20, 2016 /s/ David MacGreevey David MacGreevey Managing Director 7