Walter Energy Will Not Pay Distribution to Dominion Resources Black Warrior Trust (DOM)

As previously announced, Southwest Bank, the trustee of the Dominion Resources Black Warrior Trust (NYSE: DOM)(the "Trust") was informed by Walter Energy, Inc. (NYSE: WLT), the parent of Walter Black Warrior Basin LLC, stating that it, together with certain of its subsidiaries and affiliates, including the Company ("Debtors") filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code with the United States District Court for the Northern District of Alabama Southern Division on July 15, 2015 and that it has an agreement with lenders regarding a pre-negotiated restructuring plan. In the letter, Walter Energy, Inc. advised the Trust that it is not permitted to pay obligations that arose prior to July 15, 2015, including royalty payments.

Specifically, the Trustee was informed by Walter Energy, Inc. that it will not be paying the distribution to the Trust, which would normally be paid by August 14, and normally would include royalty payments for the production months of April, May and June 2015, as well as the portion of any future quarterly distributions relating to production attributable to periods prior to July 15, 2015. The Trustee has received no assurances regarding the status of distributions relating to production for periods after July 15, 2015. On the date the bankruptcy hearing was filed – in a series of "first day motions" – the Debtors filed motions relating to use of their cash collateral and cash management, which provide that Debtors' cash and certain other property constitute collateral of the Debtors' lenders subject to protective liens and permit use of a "zero balance" cash management system where receipts from operations including Debtors' gas operations could be swept into certain concentration or disbursement accounts. The motions do not separately segregate or provide separate treatment for production proceeds relating to the Trust's overriding royalty interests. The Trustee filed motions asking the court to reconsider and amend the Debtors' cash management order and has objected to the cash collateral motion seeking segregation of production proceeds relating to the Trust's overriding royalty interests and judicial confirmation that such proceeds are not property of the Debtor's bankruptcy estate.

A hearing was held August 18, 2015 where the court denied the Trust's motion to reconsider the Debtors' cash management order and denied the Trust's request for a temporary restraining order. A hearing on the Trust's motion regarding the Debtors' cash collateral motion is scheduled for September 2, 2015. The Trustee has additionally filed a separate action seeking declaratory judgment that the Trust's overriding royalty interests and related production proceeds are not property of the debtors' bankruptcy estate and seeking a preliminary injunction against the debtor to prevent it from (1) co-mingling the production proceeds with other funds of the debtor; (2) placing any lien or encumbrance on the production proceeds and (3) refusing to make distributions in accordance with the Conveyance governing the overriding royalty interests and Alabama law. The Trustee continues to evaluate legal options with respect to the Trust.

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