Hallador Energy (NASDAQ: HNRG) said Aug. 29 that its wholly owned subsidiary, Sunrise Coal LLC, closed the acquisition of Indiana coal producer Vectren Fuels for $320m.
Hallador has also entered into a credit agreement with PNC Bank as administrative agent for a group of several other banks. The credit agreement allows for a $250m revolver and a $175m term loan. Considering the acquisition and the payment of bank fees, Hallador’s current debt is $350m. The credit facility is collateralized by substantially all of Sunrise Coal’s assets and Hallador is the guarantor.
Hallador is headquartered in Denver, Colo., and through its wholly owned subsidiary, Sunrise Coal, produces coal in the Illinois Basis for the electric power generation industry. The just-completed buy from Vectren Corp. (NYSE: VVC) includes three deep mines, including one mine that Sunrise Coal plans to use as an access point to coal reserves it already controlled.
Vectren said Aug. 29 that the sales price was $296m in cash, plus a $24m change in working capital from Dec. 31, 2013, until the Aug. 29, 2014 closing of the transaction and is further subject to a final working capital settlement in 90 days. The after-tax net proceeds from the sale are estimated to be $280m. The proceeds will be used initially to retire $200m in outstanding Vectren Capital bank term loans and to pay down outstanding short-term debt. Additional long-term debt refinancing opportunities are available in the next year or two, through normal maturities, to further realize additional interest savings.
At June 30, 2014, a loss on the transaction of $20m was recorded. After all costs related to the transaction through the date of close are reflected, the final loss on the transaction is estimated to be $20m to $22m. Operating results for 2014, through the date of close, are estimated to be a loss of $1m to $2m.
Now that the sale of Vectren Fuels is closed, Vectren Corp. has fully exited its nonutility commodity-related businesses.
Vectren Corp. is an energy holding company based in Evansville, Ind. Its energy delivery subsidiaries provide gas and/or electricity to more than one million customers in adjoining service territories that cover nearly two-thirds of Indiana and west central Ohio.