Freedom Industries Inc., whose leaking chemical tank made much of West Virginia’s water undrinkable early this year, filed a proposed Chapter 11 plan this week that offers nothing to people with claims for polluted water.
Instead, proceeds from a settlement with AIG Specialty Insurance Co. will go to nonprofit organizations benefiting the community harmed by the spill.
Freedom filed for Chapter 11 protection in January, eight days after officials found a tank at its Etowah River Terminal leaking 4-methylcyclohexane methanol, a chemical used in coal processing. The spill made water undrinkable for a time for 300,000 West Virginia residents.
After determining reorganization wasn’t possible, Charleston, West Virginia-based Freedom decided to liquidate and filed a plan on Aug. 18 with input from the official unsecured creditor’s committee.
Freedom has $4.5 million in cash on hand. After paying professionals and other creditors entitled to priority, it expects to have $834,000 for unsecured creditors’ claims, which may total $8.5 million.
Assuming the claims don’t come in higher, unsecured creditors will get a 9.8 percent recovery, according to the explanatory disclosure statement.
There’s also a class action on behalf of everyone else with claims arising from the spill.
Freedom has a tentative settlement for the class to receive $2.9 million from AIG. The agreement takes up almost all of the $3 million in coverage provided by the policy.
The bankruptcy judge may not rule on the AIG settlement until next month.
The money from AIG earmarked for the class won’t go to the claimants themselves. Rather, a committee representing people with pollution-related claims will give the insurance proceeds to nonprofit organizations “for the general good of the community of Charleston.”
Freedom said the cost of the cleanup was $5.2 million, along with $1 million in cleanup-related professional fees.
Citing the potential for a competing proposal, Freedom this week asked the judge to extend its exclusive right to present a plan. If the extension is granted, the company’s exclusivity will be pushed back to Nov. 7.
Freedom is demolishing the tank farm that caused the spill. The judge approved selling a 79-tank blending plant in Nitro, West Virginia, for $575,000.
The case is In re Freedom Industries Inc., 14-bk-20017, U.S. Bankruptcy Court, Southern District of West Virginia (Charleston).
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