Alvarez & Marsal

By mid-2002, Horizon Natural Resources, one of the largest steam coal producers in the U.S., faced a severe liquidity crisis just months after exiting a pre-packaged bankruptcy. When the company's CEO and CFO announced plans to resign, Alvarez & Marsal was retained to fill interim management roles and lead a second bankruptcy restructuring. The team immediately began working to control cash flow and review Horizon's business plan, a process made extraordinarily complex because of multi-state operations, mix of surface and underground mines, union and non-union workforce, regulatory oversight and legacy liabilities including retiree benefits. Further complicating the situation, even as revenues dropped from soft coal prices, the threat of regulatory action forced Horizon to spend heavily on reclamation on mined-out properties that added no value to the bottom line.

A&M developed a plan to sell the better assets and put the remaining ones into a liquidating trust, which would be dedicated to reclamation. Initially, one buyer emerged willing to buy only Horizon's viable assets. However, when an auction process was announced, a second buyer came forward willing to buy both sets. The ultimate buyers negotiated a reclamation agreement with regulators as well as the two key surety companies - making Horizon the first bankruptcy case to provide an alternative solution to reclamation issues in liquidation, other than by bond defaults and state and federal takeover. Equally remarkable, over the course of the process, Horizon's bonds rose from a low of $.18 to par, increasing value to close to $400, by the time the transaction closed in September, 2004.