Heritage Coal: $21.6M 363 Sales and Liquidating Plan

KTRV LLC and its operating affiliate Heritage Coal & Natural Resources, LLC filed chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware on March 30, 2025, under lead case number 25-10601. The filing was not an attempt to reorganize a going concern. By the petition date HCNR's coal operations were already largely shut down, its prepetition lender had accelerated its debt, and management had begun selling assets out of court. The chapter 11 cases were used to stabilize what remained, resolve a foreclosure dispute with the prior owner, run a section 363 sale process, and then move the estates into a liquidating trust.

Judge J. Kate Stickles confirmed the combined disclosure statement and plan of liquidation on October 23, 2025, and the plan went effective on November 1, 2025. The economics were never seriously contested. The fight that nearly derailed confirmation was over insider releases: the unsecured creditors committee and the environmental regulators of two states forced the debtors to strip the plan's release and exculpation provisions entirely, so the confirmed plan grants no releases to any party. The same insider claims the committee fought to preserve are now the property of a liquidating trust that has retained contingency counsel to pursue them.

Debtor	KTRV LLC (2 jointly administered entities)
Court	U.S. Bankruptcy Court, District of Delaware
Case Number	25-10601
Petition Date	March 30, 2025
Confirmation Date	October 23, 2025
Effective Date	November 1, 2025
Judge	Hon. J. Kate Stickles

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From Bedrock Default to Controlled Liquidation

KTRV is a Delaware holding company; Heritage Coal & Natural Resources is the operating entity that mined and processed coal at sites in Meyersdale, Pennsylvania and Frostburg, Maryland, including a wash plant. By the petition date, operations had been significantly curtailed, with some sites in cessation or reclamation and the rest running on reduced crews. The workforce had been cut from about 112 employees before February 28, 2025 to roughly 44 by the filing, spanning mining, logistics, wash-plant, and office personnel.

Chief restructuring officer Brian Ryniker's first day declaration attributes the filing to a combination of falling coal prices, a severe liquidity crisis, and operational disruption tied to disputes with the company's former owner. The declaration states that Bedrock issued a notice of default and acceleration in January 2025, that the company defaulted on its bridge financing, and that persons associated with the former owner allegedly trespassed on mine sites, disabled equipment, and removed electronic control modules, causing more than $200,000 in damage. The disputes with Heritage Holding extended into the chapter 11 itself: the debtors filed an adversary proceeding seeking to invalidate liens held by Heritage Holding and its general manager, and Heritage Coal settled and dismissed that suit in July 2025.

The debtors had begun dismantling the business before they ever reached Delaware. The declaration describes a January 31, 2025 wash-plant sale and later agreements to sell additional permits and leases. Within weeks the debtors told the court they would have to convert to chapter 7 if they could not reach a deal with creditors.

Bedrock Bridge Loan and Cash Collateral Access

The capital structure centered on Bedrock Industries Investco 1 LLC, which the first day declaration identifies as the bridge-financing lender. Bedrock provided $10 million of bridge financing and held a security interest in substantially all of HCNR's personal property. The declaration also names Heritage Holding as a counterparty entitled to earn-out and tax reimbursement obligations under the acquisition documents — the same Heritage Holding entity tied to the former owners whose conduct the debtors blamed for part of the operational damage.

Access to cash collateral was the central first-day issue. The cash collateral motion sought immediate use to keep the mines and related operations functioning, pay employees and critical counterparties, and fund the settlement and sale path. The adequate protection package offered Bedrock replacement liens on postpetition and after-acquired property, superpriority section 507(b) claims, and payment of the prepetition lender's fees and expenses.

The carve-out was tight. After a carve-out trigger, debtor professionals were capped at $250,000 and committee professionals at $25,000, and the committee's ability to investigate the lender was limited to $25,000 — and only for investigation, not prosecution. The motion also imposed milestones, including a broker-retention filing deadline and a deadline to obtain approval of the 9019 settlement and financing structure. The court entered an interim cash collateral order on April 2, 2025. A proposed settlement to resolve Bedrock's foreclosure claims drew court scrutiny in mid-May, with the judge questioning the arrangement's viability before the 363 sale process produced the approved bids. The debtors returned for successive interim cash collateral orders as the sale process and plan negotiations played out, keeping Bedrock's financing bridge in place through the life of the operating case.

Section 363 Sales to Cobra and Simkol/Fearless

The debtors moved quickly to market the assets. By the time they filed their sale motion on April 23, 2025, they had contacted more than fifteen potential purchasers, granted ten parties data-room access, and engaged Ritchie Bros. to market equipment for a June auction. The assets on the block included the Pennsylvania mining assets, the remaining Maryland assets, and substantially all equipment.

The proposed timeline was aggressive: a May 19 stalking-horse designation deadline, a May 24 stalking-horse objection deadline, a June 2 bid deadline, a June 5 auction, and a June 12 sale hearing. Bids had to be all-cash and backed by a 10% good-faith deposit, and bid protections for any stalking horse were capped at 3% of total cash consideration. Judge Stickles entered the bidding procedures order on May 19, 2025, approving the framework for stalking-horse agreements, auction and objection mechanics, and assumption-and-assignment procedures for contracts and leases, overruling objections from the prior owners to specific deadlines.

The process produced two approved transactions rather than a single buyer. One order approved a sale to Cobra Mining's designees, 97 Mining Equipment Company, LLC and 97 Mining Operating Company, LLC. The Cobra purchase agreement reflects $5.725 million in cash consideration split between specified equipment and remaining assets, with a $601,600 deposit applied at closing and a $20,000 buyer credit due at closing. The second order approved a sale to Simkol Corp. and Fearless Leasing, LLC covering identified real property, equipment, and operating permits tied to the Summit, Saylor Hill, Shaw Mines Refuse, and Shaw Tipple sites. That agreement required the sellers to deliver good and marketable title, including the return of title to equipment that had previously been subject to Bedrock's strict foreclosure.

The plan and confirmation materials later described the combined Simkol/Fearless and Cobra bids as worth more on a cash basis than the next-best combined alternative, including a $2.5 million Cobra deal for the wash plant in Lonaconing, Maryland. News coverage put the combined winning bids at about $21.6 million, and a Delaware judge indicated she would approve both sales.

Liquidating Plan and Class Treatment

The debtors pivoted from an operating-case sale to a formal liquidation plan. The September 1, 2025 combined disclosure statement and plan of liquidation created a liquidating trust to receive the estates' liquidating trust assets on the effective date, with the estates substantively consolidated for voting, confirmation, and distribution purposes and claims deemed filed against HCNR for those limited purposes.

Administrative expenses were generally to be paid in cash. General unsecured creditors in Class 4 were slated to receive a 70/30 split of proceeds from sold and unsold assets, subject to a $3 million cap for unsecured creditors. Convenience claims of $20,000 or less, or those opting in, were to receive a 10% recovery from the initial distribution fund, while equity interests were cancelled with no recovery. The committee separately pegged projected unsecured recoveries at roughly 0.5% to 10% of allowed claims.

The confirmed structure left a narrow impaired-class profile, with equity cancelled and the liquidating trustee empowered to administer claims, pursue causes of action, and make distributions after the effective date while the Bedrock lien remained attached to the liquidating trust assets. Class 5 was the lone voting class to weigh in, voting to accept the plan with $72,275.21 of $89,084.79 in dollar amount accepting. The effective date notice states that the plan became effective on November 1, 2025 at 12:01 a.m., that the liquidating trustee was appointed as of that moment, and that estate property vested in the trust free and clear except for the Bedrock lien, while setting a 30-day administrative-claim bar date and a 45-day deadline for final professional compensation applications.

Stripped Insider Releases and Preserved Svonavec Claims

As originally proposed, the September 1 plan contained a release provision in Section 9.02 and an exculpation provision in Section 9.03 running in favor of the "KTRV Parties" — the debtors' officers, directors, managers, members, and professionals. The Official Committee of Unsecured Creditors filed a limited objection on October 7, 2025, arguing that the releases would bar the liquidating trustee from pursuing potential director-and-officer and breach-of-fiduciary-duty claims against insiders, and that they failed the Third Circuit's Zenith factors because the KTRV Parties made no substantial contribution, showed no identity of interest, and were not essential to the plan. The committee pointed to the limited projected recoveries as undermining any justification for insider releases.

The debtors initially defended the provisions, with the CRO arguing that the plan contained no third-party releases, only debtor releases and exculpation for a narrow set of participating parties. The dispute was not resolved at the scheduled October 15 hearing. A Delaware judge rejected the plan over the releases, and the court held a status conference on plan resolution on October 20, 2025 as the debtors filed successive revised proposed findings and negotiated the release language down. The October 23 confirmation order expressly directed that Sections 9.02 and 9.03 "shall be stricken" and that nothing in it would provide releases or exculpation to any party; a provision that would have required the debtors' managers to provide free services in exchange for releases was also stricken. The judge approved the plan once the insider protections were removed.

Stripping the releases left the insider claims in the estate, and the debtors had already moved to monetize them. On September 22, 2025 they sought to retain Spiro Harrison & Nelson as special litigation counsel on contingency to evaluate and pursue claims against Heritage Holding Co., LLC, Jason Svonavec, Angela Svonavec, and related entities — the "Svonavec Parties." The identified causes of action include indemnification, breach of fiduciary duty, and fraudulent inducement, the same insider claims the committee fought to preserve. The contingency tier rises with case stage: 33.3% of gross proceeds plus 1.25x costs for a pre-complaint settlement, 35% plus 1.5x costs before the 90-day pretrial window, and 37.5% plus 2x costs at or after that window, with no fee if nothing is recovered. The committee objected to the retention, but the court authorized it on October 15, 2025.

Pennsylvania and Maryland Reclamation Objections

The other substantive confirmation objections came from environmental regulators in both mining states. The Commonwealth of Pennsylvania Department of Environmental Protection objected on October 7, 2025, arguing the plan was "proposed by means forbidden by law" under section 1129(a)(3) because it sought to dissolve the debtors and abandon unsold permits without satisfying ongoing reclamation and water-treatment duties. PA DEP focused on two sites: the Fisher Mine in Somerset County, which had exceeded its permitted pit volume by more than one million cubic yards and left an exposed 185-foot highwall, under-bonded by roughly $3.7 million; and the Milford #3 Coal Refuse Disposal Area, which discharges acidic water and carries an estimated bond shortfall of about $1,122,104 including two years of water treatment. PA DEP argued these are non-dischargeable police-power obligations, not "claims" that can be enjoined.

The State of Maryland Department of the Environment filed a parallel objection the same day, citing notices of violation at the Duckworth Mine and Mt. Zion sites near Frostburg and demanding that the plan provide financial assurance for reclamation and long-term water treatment rather than discharging those obligations. Both states, together with the committee, told the court the plan ignored environmental law. PA DEP had already raised the same concerns at the sale stage, insisting that any buyer assume permit-transfer and reclamation obligations under the Pennsylvania Mining Laws.

The objections were resolved by a broad carve-out rather than by funding reclamation. The confirmation order preserves the rights of the "PA/MD Governmental Units," providing that nothing in the plan discharges, releases, enjoins, or impairs any liability under police, regulatory, or environmental law as to any entity that owns, operates, permits, or controls a mine after the effective date — including liability for reclamation, plugging and abandonment, water treatment, and mine drainage. Alongside confirmation, the debtors filed a notice on October 9, 2025 to abandon 12 mining sites and associated permits in Pennsylvania and Maryland — including Fisher #3, Ponderosa, Milford-Refuse, Mt. Zion, and Duckworth — as fully encumbered, burdensome, and of no value to the estates. The confirmation findings recite debtor reclamation estimates of $1.75 million to $2.75 million at the Walker Site and $100,000 to $150,000 of near-term costs at the Beechwood Site.

Simkol/Fearless Equipment-Delivery Dispute

The most active post-confirmation contest is a sale-order compliance fight brought by the Simkol/Fearless buyers. It began before the effective date: the purchasers filed their original motion to compel on September 24, 2025, alleging that since the July 1, 2025 closing the debtors had failed to deliver four pieces of equipment valued at $335,000. The most pointed allegation is that the debtors sold the same CAT D11R dozer twice — once to Simkol/Fearless and once to the 97 Mining (Cobra) buyers — and collected payment from both, while also failing to deliver a CAT 740B articulated truck and a CAT 769C water truck and trading away a Chevrolet 2500HD before the sale.

The dispute carried into the post-effective-date period. The purchasers' amended motion to compel, filed February 13, 2026, asks the court to require the liquidating trustee to comply with the sale order and purchase agreement, deliver or refund value for the undelivered equipment, recognize an administrative claim, and provide good title to a Freightliner lube truck. The trustee's March 4, 2026 response, filed through Dundon Advisers, says refund or administrative-claim relief is premature, disputes that the trust has refused to comply, states that it does not possess the missing equipment, and argues that title to the lube truck requires a separate reissuance process. The trustee adds that it is still investigating whether the risk of loss stayed with the estate or passed at sale closing, leaving the dispute live into March 2026.

Final Fee Awards

Final fee applications for the main estate and committee professionals were filed on December 16, 2025, and an omnibus final fee order followed on February 10, 2026. The supporting certification lists final allowances of $1,959,179.50 in fees and $39,856.58 in expenses for Morris James LLP, $12,672.00 in fees for Stretto, Inc., $782,609.50 in fees and $7,440.92 in expenses for FBT Gibbons LLP, and $269,895.50 in fees and $3,933.04 in expenses for Landis Rath & Cobb LLP. The figures imply roughly $3.08 million in approved final fees and expenses for the four identified professionals, with Morris James accounting for the largest share of the debtor-side administrative cost.

Key Timeline

Date	Event
March 30, 2025	KTRV LLC and HCNR file chapter 11 petitions in Delaware
April 2, 2025	Interim cash collateral order entered
April 23, 2025	Sale motion filed
May 19, 2025	Bidding procedures order entered
June 13, 2025	Combined winning bids reported at about $21.6 million
September 1, 2025	Combined disclosure statement and plan of liquidation filed
September 22, 2025	Application to retain Spiro Harrison & Nelson as contingency litigation counsel
September 24, 2025	Simkol/Fearless file original motion to compel sale compliance
October 7, 2025	Committee, PA DEP, and Maryland MDE file confirmation objections
October 9, 2025	Notice of intent to abandon 12 mining sites and permits
October 23, 2025	Plan confirmed with Sections 9.02 and 9.03 stricken
November 1, 2025	Plan effective date; liquidating trustee appointed
February 10, 2026	Omnibus final fee order entered

Frequently Asked Questions

Who is the claims agent for KTRV LLC and Heritage Coal?

Stretto, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What was the central dispute at confirmation?

The fight was over insider releases, not plan economics. The unsecured creditors committee and the Pennsylvania and Maryland environmental regulators objected to the release and exculpation provisions, and the judge approved the plan only after Sections 9.02 and 9.03 were stricken, so the confirmed plan grants no releases or exculpation to any party.

How were the debtors' assets sold?

Through two court-approved section 363 sales. Cobra Mining's designees acquired specified equipment and remaining assets for $5.725 million in cash, and Simkol Corp. and Fearless Leasing acquired real property, equipment, and permits at the Summit, Saylor Hill, Shaw Mines Refuse, and Shaw Tipple sites. News coverage reported combined winning bids of about $21.6 million.

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