The bankruptcy court for Licking River Mining LLC and related eastern Kentucky coal producers on Feb. 20 approved a procedure for assets of these companies to be auctioned.
On Feb. 17, Licking River Mining LLC, Licking River Resources Inc., S. M. & J. Inc., Fox Knob Coal Co. Inc., J.A.D. Coal Co. Inc., U.S. Coal Corp., Harlan County Mining LLC, Oak Hill Coal Inc., Sandlick Coal Co. LLC and U.S. Coal Marketing LLC asked the court for an order authorizing Debtors J.A.D. Coal, Fox Knob Coal and Sandlick Coal to sell substantially all of their assets free and clear of liens, claims, interests, and encumbrances. The companies had been forced by creditors in May and June of last year into Chapter 11 protection at the U.S. Bankruptcy Court for the Eastern District of Kentucky.
Said that Feb. 17 motion: “The Debtors have evaluated the JAD Debtors’ ability to reorganize and have determined that a sale of substantially all of the JAD Debtors’ assets is in the best interests of their Estates and creditors. The Bidding Procedures that were approved by the Bidding Procedures Order have governed the submission and review of bids for the JAD Debtors’ assets and were designed to obtain the highest and best possible offers to purchase those assets. The Debtors have evaluated the terms, conditions, benefits and risks associated with the proposed sale of the JAD Equipment and will evaluate the same for any additional asset sale proposed at the Auction, as well as the risks and benefits of other alternatives. In their sound business judgment, the Debtors have concluded that a sale of the JAD Equipment to the Proposed Buyer offers the most advantageous terms and greatest economic benefit to the JAD Debtors and their Estates, subject to the potential for receiving higher and better bids at the Auction. The Debtors have also concluded that a sale of the JAD Debtors’ remaining assets on such terms as may be negotiated at the Auction will be the best option for their Estates and all interested parties.
“The Debtors have further determined that the timing of the proposed sale is critical. Prices for coal continue to decrease and remain at historic lows. This hit to the JAD Debtors’ revenue stream at the same time as they are facing unanticipated geological issues that significantly increase in production costs has made the last several months of operation exceptionally difficult for the JAD Debtors, and given the contemplated sale, it is not likely that the Debtors will emerge as a stand-alone going concern. Although the JAD Debtors were able to maintain their operations for the vast majority of their bankruptcy cases, market conditions recently required that the JAD Debtors slow mining operations on February 13, 2015. As the JAD Debtors no longer have an ongoing source of revenue, it is imperative that the sale proposed herein be approved promptly by February 27, 2015 and close by March 15, 2015 (as contemplated in the Bidding Procedures) to ensure that the JAD Debtors are able to yield the greatest possible return on their assets for the benefit of all creditors and parties in interest. If the contemplated sale is not approved and does not close by this time, the JAD Debtors are concerned that their Estates may not be financially able to bear the administrative burden of a continued and protracted sales process, which would be to the detriment of all interested parties.”
Court approves sale schedule, credit bid procedures
Said the Feb. 20 court order: “The Bidding Procedures and Bidding Deadlines as attached hereto in Exhibit A be and hereby are APPROVED for the sale of any and all assets of for the sale of all assets of Licking River Resources, Inc., Licking River Mining, LLC, Oak Hill Coal, Inc., and S. M. & J., Inc., which are collectively and commonly referred to in these bankruptcy cases as the ‘Licking River Debtors.’ The Debtors are authorized to proceed with the Sale Process as described in, and in accordance with, the Bidding Procedures. The Debtors, in consultation with the Licking River Lenders and the Committee, may extend the Bidding Deadlines or modify the Bidding Procedures without further Order of this Court; provided, however, that the Debtors may not materially modify the Bidding Procedures (other than extension of any deadlines) without the approval of the Committee.
“On or before Wednesday, March 11, 2015 at 5:00 p.m. (ET), any party asserting a right to credit bid under 11 U.S.C. § 363(k) (a ‘Credit Bid Party’) including, without limitation, the Licking River Lenders, shall file a notice of right to credit bid with the Court setting forth: (a) the LR Assets to which it asserts a right to credit bid, (b) the amount of its claim to which it asserts a right to credit bid on the LR Assets and the components of that claim (i.e., principal, accrued interest and any other charges), and (c) evidence of its secured status on any LR Assets to which it asserts a right to credit bid (a ‘Credit Bid Notice’). Any objections to a Credit Bid Notice shall be filed on or before Friday, March 13, 2015 at 12:00 p.m. (ET). If a party timely files an objection to a Credit Bid Notice, this Court shall hold a hearing to consider the rights, circumstances and any conditions on the right of Credit Bid Party to submit a credit bid on Tuesday, March 17, 2015 at 9:30 a.m.”
The sale hearing to consider the sale of substantially all of the Licking River Debtors’ Assets, including assumption and assignment of contracts and leases, is to be held on March 31 at the courthouse in Lexington, Kentucky.
Notable is that a credit bid is where a creditor can bid the value of what they are owed against any assets for sale, which usually precludes an outside bidder from having a chance at that asset.
Get ready to bid; everything must go
The assets to be sold consist of substantially all assets connected with the going-concern operations of the Licking River Debtors’ coal mining business, including but not limited to:
- all buildings and improvements owned by any of the Licking River Debtors and any related leasehold rights of the Licking River Debtors in such related Unexpired Leases that are assumed and assigned;
- any contractual rights of the Licking River Debtors relating to such mining operations as are assumed and assigned;
- all equipment, fixtures and other personal property of the Licking River Debtors relating to such mining operations;
- all coal inventories of the Licking River Debtors relating to such mining operations;
- all other inventories on hand relating to such mining operations or otherwise owned by the Licking River Debtors on the date of Closing;
- copies of property records relating solely to the mining operations, and copies of certain personnel and payroll records relating solely to the employees who were employed by the Licking River Debtors immediately prior to the closing of the sale(s);
- all necessary contracts not described above;
- all necessary permits to the extent transferable; and
- all trucks, trailers, and related motor vehicle equipment owned by the Licking River Debtors.