Saying they are already well along in the process of selling their assets, Central Appalachian producer Trinity Coal and related companies in bankruptcy are seeking court approval for a July 30 “stalking horse” auction for those assets.
The U.S. Bankruptcy Court for the Eastern District of Kentucky has set a July 10 hearing on the June 26 sale motion. These companies, controlled by Essar Minerals out of India, were forced into chapter 11 protection in February.
The debtors are a group of 16 privately-held companies, the first of which, Trinity Parent Corp., wholly owns all of the other companies which are its direct and indirect subsidiaries. Their operations are in eastern Kentucky and southern West Virginia.
In 2010, Holdings was purchased by and became a wholly owned subsidiary of Essar Minerals in a $600m deal. “Since then, however, coal has experienced a precipitous decline in demand due to cheaper alternative sources of energy, namely natural gas and nuclear power, and other factors,” said the June 26 sale motion. “This has adversely impacted the entire coal industry, including the Debtors’ business and financial condition, which have been in decline since 2011. Consequently, since the 2010 Transaction, the Debtors have closed five out of their six coal mining complexes, as described in further detail below.”
The debtors’ operations are organized into six distinct coal mining complexes. Three are located in West Virginia and are referred to as Deep Water Met Coal Mine Complex, North Springs Met Coal Mine Complex and Falcon Steam Coal Mine Complex. The West Virginia Operations produce compliance, low-sulfur steam coal and mid-to high-vol metallurgical coal. The debtors are currently operating and mining coal only on Deep Water and related operations in West Virginia.
The other three complexes are located in Kentucky and are referred to as Prater Branch Steam Coal Mine Complex, Little Elk Mining Steam Coal Mine Complex and Levisa Fork & Bear Fork Reclamation Projects. The currently-idled Kentucky Operations produced compliance and low-sulfur steam coal.
Here is a description offered in the sale motion of each operation:
Deep Water – is located in Fayette County, W.Va. As of March 1, it had estimated total coal reserves of approximately 70 million saleable tons and produces high volatile “A” met coal. Approximately 40 thousand tons of met coal is mined per month. Deep Water consists of one active surface mine with multiple units, two active highwall miners, and two idle underground mines.
North Springs – is a 16,483-acre site with a well established infrastructure located in McDowell, Mingo, and Wyoming counties, W.Va. When it was operating, North Springs produced compliance steam coal and high volatile “B” met coal. North Springs controls an estimated approximately 16.1 million tons of coal reserves, most of which is met coal.
Falcon – is located in Boone County, W.Va., and controls an estimated 6.2 million tons of coal reserves. This complex produced low-sulfur steam coal. The debtors have received an offer to purchase Falcon for an unnamed party, and anticipate that it will move forward with a motion to approve a sale of Falcon outside of the “stalking horse” bidding process.
Prater Branch – is located in Magoffin and Floyd counties, Ky., and controls an estimated 18.3 million tons of coal reserves. This complex produced lower-sulfur steam coal and includes the Banner Load Out.
Little Elk – is located in Perry County, Ky., and controls an estimated 11.9 million tons of coal reserves. This complex produced mid-sulfur steam coal.
Levisa Fork – is located in Floyd County, Ky. Coal reserves at Levisa Fork have been depleted and the debtors have been conducting only reclamation activities at the site.
Asset sale effort is long-established and well-advanced
In recent months, the bankrupt companies, financial advisor Moelis & Co. LLC and various parties to the case have worked “a robust sales process” to maximize the value of assets, the companies said. Among other things, the debtors, together with Moelis, updated and populated a virtual data room containing thousands of documents in connection with the sale process regarding the debtors’ financial affairs and business operations, and began soliciting interest by contacting potential buyers and entering into non-disclosure agreements (NDA) with parties who expressed initial interest in acquiring some or all of the debtors’ assets.
More than 60 potential buyers were solicited, including competitors as well as other strategic and financial investors. More than 30 potential purchasers thereafter entered into NDAs and conducted various degrees of due diligence, including management presentations and site visits.
The debtors received first round non-binding proposals from 14 potential buyers across all six mining complexes. After receiving the first-round bids, the debtors and their advisors invited certain of the potential buyers to return for a second round bid and submit concrete binding offers and thereby compete to be a “stalking horse” for some or all of the debtors’ assets. Thereafter, several additional potential purchasers approached the debtors and their advisors and commenced to negotiate for the purchase of all or some of the debtors’ assets.
The debtors said they are currently in negotiations with multiple parties to be a stalking horse bidder for their assets, including the opportunity for one or more of such potential purchasers to become a stalking horse bidder pursuant to an asset purchase agreement (APA).
The debtors are requesting the authority to enter into one or more stalking horse APAs. As required by the terms of the their debtor-in-possession financing facility, the debtors intend to complete the sale of all or some of their assets in transactions to close by Aug. 28.
The companies are asking the court to set an initial bid deadline of July 19, a final bid deadline of July 26, and a July 30 auction at the offices of Bingham Greenebaum Doll LLP, 300 W. Vine Street, Suite 1100, Lexington, Ky. 40507 (or at any such other location or time as the debtors may later designate).