Solution to Horizon Bankruptcy

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Horizon Natural Resources (HNR) had been in a state of turmoil for several years before its final bankruptcy filing – the second in less than a year – in November of 2002.  Horizon, which had emerged from its first bankruptcy filing the previous May, was once the fourth largest coal mining company in the United States but had declined continuously since the fall 2001 insolvency of its bonding company, Frontier Insurance, left it without reclamation bonds.
 
Not long after the loss of bonds, the regulatory authorities in the states of Kentucky, West Virginia, Illinois and Indiana, and the OSM in Tennessee called for mining activity at the forty-two HNR companies to be suspended if the reclamation bonds could not be replaced.

Faced with the prospect of great loss, HNR induced American International Group (AIG) and St. Paul Travelers to replace the half billion dollars in reclamation bonds by posting a large percentage of collateral. Shortly thereafter, HNR went into bankruptcy.

Realizing the need to act quickly to save their 500 million dollars worth of issued reclamation bonds, AIG immediately hired their top choice consultant, attorney Rick Thomas -- an engineer and the former CEO of a nationally recognized environmental surety company -- to begin claims management. After assessing the magnitude and probability of loss for AIG, Thomas and his team of engineers developed a strategy (the AIG plan) that would avoid loss and guarantee the completion of reclamation work on the AIG and Travelers bonded sites in a plan that was later confirmed by the Bankruptcy Court of the state of Kentucky.