The Cloud Peak Bankruptcy Shifts As It Approaches Important Dates

Jun 18, 2019

Seal of the United States Department of Justice
Credit U.S. Department of Justice

The Delaware court considering Cloud Peak Energy's bankruptcy has agreed to a final sale schedule for its assets. The timeline was postponed to next month after objections rolled in from the U.S. Trustees, shareholders, and reclamation bondholders.

Instead of a deadline approaching for bids this Friday, June 21, bids will be accepted until July 8. The auction itself was moved from June 26 to July 11.

Eric Snyder, a bankruptcy expert and partner at Wilk Auslander, a firm unconnected to the proceedings, said the delay could also be related to a recently proposed executive bonus plan. Eleven of Cloud Peak's top executives could get paid up to $500,000 each, depending on how the asset sale goes.

"It keeps them through the sale, they have a financial upside depending on how the sale does," Snyder said.

He said the more the mine is sold for, the more executives make. Few of Cloud Peak's mines are expected to be attractive to buyers.

Snyder posited the executive incentives could be related to that delayed schedule.

"It might've been the board of directors said we're leaving, and then the bidders said, 'They have to stay through closing or I'm not making a bid.' So, they put it off probably until this KEIP [Key Employee Incentive Plan] is in place on July 2." Snyder said, "It's not a coincidence."

Upper Cloud Peak Management already expects to collectively pull in $16.1 million in bonuses by the end of 2019.

Prior to the sale, the court considering Cloud Peak's case denied a request for an equity committee. It would have represented more than 300 common stock shareholders hoping to get a seat at the table.

Leaders for the ad hoc committee argued common stock shareholders should have the chance to get something back for its investment in the company.

Leader for the group Shawn Cariglio also feels the company may be devaluing its assets, to the disadvantage of shareholders. But, the court sided with Cloud Peak that the group might get in the way of proceedings. Cariglio said that response didn't feel good.

"For them to come out like this is, you know, with a two-page document saying now we don't want you guys to get in the way. It's kind of a slap in the face to me," he said.

Cariglio said he believes there's a large list of interested bidders in Cloud Peak's assets and isn't ready to sell his stock just yet.