Next Week in Bankruptcy

Hearings on Energy Future Holdings Corp.’s plan to rework some $42 billion in debt begin next week in a Wilmington, Del., courtroom.

On Tuesday, lawyers for Energy Future will go before Judge Christopher Sontchi to prove that the company’s plan is both fair to creditors and will resolve the financial troubles that triggered its bankruptcy.

The Dallas power giant is pushing to get out of bankruptcy through a combination of deals and debt-for-equity swaps that will divide its business in two.

Backers of the company’s chapter 11 exit plan have already reached a deal to settle some big-ticket fights with GSO Capital Partners LP and Avenue Capital Management.  If approved, the settlements could free up hundreds of millions of dollars to aid Energy Future on its way forward.

Energy Future filed for bankruptcy protection in April 2014, overloaded with debt in a depressed energy market. The debt load is the legacy of a leveraged buyout that occurred not long before energy prices began to fall.

The chapter 11 plan is premised on selling Oncor, Energy Future’s valuable transmissions business, to an alliance of creditors and Hunt Consolidated Inc. Energy Future’s energy generating and retailing division would be spun off into a separate company, which will be owned mostly by senior lenders.

In addition to being subject to bankruptcy-court review, Energy Future’s chapter 11 plan must pass muster before Texas energy regulators and the Internal Revenue Service.

On Thursday in Richmond, Va., Alpha Natural Resources Inc. will ask a judge to sign off on a plan to send a collection of closed coal mines to the auction block as it revamps its business in bankruptcy.

At least 16 idled mines in West Virginia, Kentucky, Tennessee and Illinois are being put up for sale in Alpha’s chapter 11 proceeding, which began in August. Generally, the properties being sold aren’t generating revenue but are draining cash for reclamation and maintenance costs. The company says it may add or remove some properties to the list.

Alpha has set a Jan. 20, 2016, target date for bids and would like to seek final approval from Judge Kevin Huennekens for the sales by February, court papers show.

Alpha is one of a number of coal mining operations to take shelter in bankruptcy in a bid to weather widespread distress in the market. Bristol, Va.-based Alpha , ine of the country’s largest coal producers, picked up a lot of debt in the 2011 acquisition of Massey Energy. The company reported more than $7 billion in liabilities when it filed for bankruptcy.

And Friday in Wilmington, Judge Laurie Selber Silverstein is slated to consider Colt Defense LLC’s disclosure materials, which must receive the judge’s approval before the company’s creditors can begin voting on its restructuring plan.

Lawyers for the iconic gun maker recently called off a bankruptcy auction for the company after they didn’t receive any qualified bids by a court-designated deadline. The cancellation leaves Colt officials with a backup plan to get the company out of bankruptcy: a reorganization in which lenders would agree to eliminate $250 million of unsecured bond debt in exchange for taking a piece of ownership in the company, court papers show.

The planned reorganization would also give the West Hartford, Conn., company, which has faced sales declines for rifles and handguns, access to $50 million once it emerges from bankruptcy.

Colt’s creditors oppose the gun maker’s plan to exit bankruptcy protection, claiming the proposal benefits the company’s private-equity owner and landlord at their expense. Lawyers for the company’s unsecured creditors recently objected to the plan, saying their clients are being offered worthless ownership shares in the company as repayment.

Colt filed for chapter 11 protection in June after struggling with supply-chain issues, a slowdown in gun sales and its loss of a key contract to supply M4 rifles to the U.S. Army.

-Peg Brickley and Katy Stech contributed to this article.

Write to Tom Corrigan at [email protected]