Coal producer Walter Energy, Inc. is headed to a bankruptcy auction with an offer from senior lenders to cancel or take on $1.25 billion worth of the company's debts to set a floor price for the competition, Dow Jones Daily Bankruptcy Review reported today. In addition to the $1.25 billion "credit bid," Walter's senior lenders are offering $5.4 million cash for the Alabama-based company. In bankruptcy, lenders can pledge the amount they're owed by a bankrupt company when bidding on a company's assets. In effect, the lenders can swap all or a portion of the face amount of the debt they're owed for an ownership stake.
