DALLAS, Sept. 16, 2015 /PRNewswire/ -- As previously
announced, Southwest Bank, the trustee of the Dominion Resources
Black Warrior Trust (the "Trust") was informed by Walter Energy,
Inc., the parent of Walter Black Warrior Basin LLC (the "Company"),
stating that it, together with certain of its subsidiaries and
affiliates, including the Company ("Debtors") filed a petition for
relief under Chapter 11 of the U.S. Bankruptcy Code with the United
States District Court for the Northern District of Alabama Southern
Division on July 15, 2015 and that it
has an agreement with lenders regarding a pre-negotiated
restructuring plan. In the letter, Walter Energy, Inc. advised the
Trust that it is not permitted to pay obligations that arose prior
to July 15, 2015, including royalty
payments. Specifically, the Trustee was informed by Walter Energy,
Inc. that it will not be paying the distribution to the Trust,
which would normally be paid by August
14, and normally would include royalty payments for the
production months of April, May and June
2015, as well as the portion of any future quarterly
distributions relating to production attributable to periods prior
to July 15, 2015. The Trustee has
received no assurances regarding the status of distributions
relating to production for periods after July 15, 2015.
On the date the bankruptcy was filed – in a series of "first day
motions" – the Debtors filed motions relating to the use of cash
collateral and cash management, which provide that cash held by the
Debtors and certain other property constitute collateral of the
Debtors' lenders subject to protective liens and permit use of a
"zero balance" cash management system where receipts from
operations including Debtors' gas operations could be swept into
certain concentration or disbursement accounts containing other
cash. The motions do not separately segregate or provide separate
treatment for production proceeds relating to the Trust's
overriding royalty interests. The Trustee filed (i) a motion asking
the court to reconsider and amend the Debtors' cash management
order to provide for segregation of production proceeds relating to
the Trust's overriding royalty interests, (ii) an objection to the
cash collateral motion seeking protections based on the
Debtors' use of the production proceeds, and (iii) a separate
lawsuit seeking various forms of relief including a temporary
restraining order for segregation of production
proceeds relating to the Trust's overriding royalty interests
and judicial confirmation that such proceeds are not property of
the Debtor's bankruptcy estate.
A hearing was held August 18, 2015
where the court denied the Trust's motion to reconsider the
Debtors' cash management order and denied the Trust's request for a
temporary restraining order. Subsequently, the Trustee
dismissed the lawsuit, but continued to urge its objections in
connection with the Debtors' cash collateral motion. A
hearing on the Trust's objection (and other objections) to the
Debtors' cash collateral motion was held September 2 and 3, 2015. On September 14, 2015, the court issued its ruling
on the Debtors' cash collateral motion and denied the Trustee's
request for protections based on the Debtors' use of the production
proceeds including segregation of the production proceeds and a
requirement for continued distributions of production proceeds to
Dominion in the ordinary course of business. The Trustee
continues to evaluate legal options with respect to the Trust.
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SOURCE Dominion Resources Black Warrior Trust