After three major creditors of Trinity, Credit Agricole SA, ING Groep NV and Natixis, filed the involuntary Chapter 11 petition on February 19 in the U.S. Bankruptcy Court for the Eastern District of Kentucky in Lexington, they asked the court to appoint a trustee to essentially take control of Trinity’s business operations while it undergoes reorganization. The three creditors claim Trinity defaulted on bills totaling about $104.3 million.
Credit Agricole told the court its agreement to provide debtor-in-possession financing to Trinity was conditioned on Stetson, who had been employed by the coal company prior to his being appointed CRO.
Samuel Crocker, the U.S. Trustee, objected to approximately $115,000 in “additional compensation” to be provided to Stetson in his role as CRO. Such payments are impermissible under federal bankruptcy law, the trustee said. “There is no question that Mr. Stetson, as the CRO, is an insider of the debtors,” Crocker told the court. “The key issue is whether these payments were made to induce him to remain as CRO. The United States Trustee believes this to be the case.”
The West Virginia Department of Environmental Protection said it was concerned that Trinity was seeking to “protect David Stetson in his personal capacity from possible negative effects under the Surface Mining Control and Reclamation Act.” The U.S. Department of the Interior’s Office of Surface Mining has a role in enforcing the Act. The states of West Virginia and Kentucky each have primacy enforcement responsibility in their respective jurisdictions.
The U.S. government took the position that the court did not have the authority to grant the CRO protection for activities taken regarding mining activity that he undertakes as CRO. Further, “the court should not grant such protection if it does not have the authority,” said U.S. Attorney Kerry Harvey.
In March, Crocker appointed the following Trinity creditors to serve on the official committee of unsecured creditors: David True, president of Austin Powder Co., as interim chairman; Eric Cavanaugh, associate general counsel of Duke Energy Corp., on behalf of Duke Energy Carolinas; and Kevin Lee, treasurer and general credit manager of Whayne Supply Co., on behalf of the Louisville, Ky.-based company.
Trinity is the parent of 16 privately held companies in eastern Kentucky and West Virginia. The companies produce both metallurgical and steam coal. Trinity was acquired by Essar for $600 million in 2010.
