Cline Mining, a Canadian company with a largely idled coal mine in Colorado, said Dec. 3 that it has worked out a proposed recapitalization transaction that would lead to a reduction of over C$55m in secured debt issued by Cline, the compromise or arrangement of certain unsecured debts of Cline, and a change of control of the equity of Cline.
The terms of the recapitalization have been negotiated with Marret Asset Management Inc., which has investment discretion related to all of the secured notes issued by the company. The secured notes represent in excess of 95% of the outstanding debt of Cline and its subsidiaries. The recapitalization comes after an extended period of forbearance by Cline’s secured noteholders, whose debts matured on June 15, 2014, and remain unpaid.
“The recapitalization transaction is a positive development for Cline as we seek to further streamline our projects and capital structure to better withstand prolonged commodity price weakness,” said Matt Goldfarb, Chief Restructuring Officer and acting Chief Executive Officer of Cline. “It will allow us to stabilize our financial situation while continuing to pursue opportunities to optimize the Company and work toward resuming full-scale operations at our New Elk coal mine pending improvements in the seaborne coking coal market.”
New Elk is a coal mine in southeast Colorado that was shut for years, revived by Cline earlier this decade, briefly, then shut when the coking coal export market collapsed.
Cline will seek to implement the recapitalization through a court-supervised process. To that end, Cline and its wholly-owned subsidiaries, New Elk Coal Co. LLC and North Central Energy Co. have obtained an order from the Ontario Superior Court of Justice initiating proceedings under the Companies’ Creditors Arrangement Act (CCAA).
FTI Consulting Canada Inc. has been appointed by the Court as the CCAA monitor and foreign representative with respect to the Cline Group in the CCAA proceedings. It is anticipated that the monitor will file a petition under Chapter 15, Title 11 of the United States Code to obtain a stay of proceedings and recognition of the CCAA proceedings and ther in the United States.
If implemented, the recapitalization will result in the cancellation of the existing common shares of Cline and the issuance of new common shares to the holders of the secured notes issued by Cline. Cline intends to apply to cease to be a reporting issuer upon completion of the recapitalization. Cline is seeking to complete the recapitalization within 60 to 90 days.
Cline Mining is a Canadian mining company headquartered in Toronto, Ontario, with resource development interests in Canada, the United States and Madagascar. Incidentally, it is not related to a company of a similar name founded by U.S. coal operator Chris Cline that has coincidentally just invested in the Canadian coal mining business.
Said a Nov. 7 financial report from Cline Mining about the Colorado mine: “The Company owns 100% of the New Elk mine and property located in Las Animas County, near the town of Trinidad in southern Colorado, U.S.A. The New Elk mine comprises a major metallurgical coal resource, underground mine developments and surface coal preparation plant and infrastructure. The New Elk mine has M&I coal resources of 618.9 million tons of NI 43-101 compliant in-place metallurgical steel making and thermal grade coals, which are detailed in the 2012 Technical Report. The New Elk assets include a coal preparation plant which was upgraded to a production capacity of 800 [run of mine] tons per hour, product coal silos and rail load-out, buildings, railway right of way, surface real estate, mining equipment, conveyor systems, electrics, underground workings with mine portal access from the plant site, mine permit and coal waste dump.”
The Nov. 7 financial report indicated that the mine is in very limited production, apparently to produce test coal for possible sales to cement companies in the region. Said the report: “[T]he New Elk mine is currently engaged in limited production as management assesses the potential to service regional industrial demand for the Company’s high quality coal.” U.S. Mine Safety and Health Administration data shows no production for the mine in the first three quarters of this year.