1993-12-09_GENERAL DOCUMENTS - C1981017

Home Browse Search

MEMORANDUM TO: Mike Long, Steve Renner, Cheryl Linden FROM: Jim Holden DATE: December 9, 1993 RE: Proposed Mid-Continent Plan amendments Procedural background. On November 29, Resources advised the Bankruptcy Court that neither Sanwa nor the Unsecured Creditors' Committee would support Plan as presently filed, and requested time to revise the Plan. Judge Clark complained about the meagerness of the distribution to unsecured creditors and the uncertainty of that distribution. Resources stated that the principal focus of the case is mine reclamation and that the merits of the case should be evaluated according to what is distributed on account of all claims, including reclamation claims. Judge Clark appears not to be concerned about reclamation claims. Judge Clark ordered Resources to file an amended plan and disclosure statement by January 10. If satisfactory changes cannot be negotiated, the Court must be advised by January 10. Committee's criticism of Plan as filed: The Plan first nets out (i) costs of bankruptcy administration, (ii) property taxes, (iii) sales, severance, and reclamation taxes, (iv) $1.5 million for reclamation, and (v) $250,000 for other environmental remediation. The remaining funds then are divided 77% to Sanwa and 23% to the unsecured creditors. Assuming Resources' liquidation projections, unsecured creditors would get about 2 cents on the dollar. If liquidation projections are not realized, unsecured creditors might get nothing. Unsecured creditors complain that the Plan tilts too far in favor of reclamation claims. The Committee has threatened to seek Court determination that reclamation claims are general unsecured claims rather than priority claims. Unsecured creditors have demanded assurances of a 5% distribution. There are about $14 million of general unsecured claims. A 5% distribution on $14 million would require $700,000. Sanwa's criticism of Plan as filed: The Plan does nothing to protect corporate affiliates of Resources who have guaranteed Sanwa's loans. Sanwa is asked to subordinate most of its lien claims to reclamation and unsecured creditors, without receiving any assurance that this will buy security for its other borrowers.