Canada-based Cline Mining, which has a shut coal mine in Colorado as a primary asset, announced Feb. 5 that it has received approval of the proposed recapitalization plan announced in December 2014.
Cline Mining and subsidiaries New Elk Coal Co. LLC and North Central Energy Co. obtained creditor protection in proceedings under Canada’s Companies’ Creditors Arrangement Act under an initial order of the Ontario Superior Court of Justice dated Dec. 3, 2014. On Jan. 20, Cline amended its proposed recapitalization plan. On Jan. 21, the creditors voting on the Recapitalization Plan approved it unanimously, and on Jan. 27 the court approved and sanctioned the Recapitalization Plan. On Jan. 28, the court approval of the Recapitalization Plan was given full force and effect pursuant to an Order of the U.S. Bankruptcy Court for the District of Colorado.
The Original Plan was amended on Jan. 20 to reflect the terms of a proposed resolution in respect of a class action proceeding against Cline and its New Elk subsidiary, which controls the shut coal mine in Colorado, alleging violation of the U.S. federal Worker Adjustment and Retraining Notification Act (WARN Act).
The Recapitalization Plan provides for three separate classes of creditors, namely (i) secured noteholders, (ii) affected unsecured creditors and the WARN Act plaintiffs. An allowed secured claim will be compromised, released and discharged in exchange for new Cline common shares representing 100% of the equity in Cline, and new indebtedness in favor of the secured noteholders. The claims of affected unsecured creditors, which exclude the WARN Act claims but include the secured noteholders allowed unsecured claim, will be compromised, released and discharged in exchange for each such affected unsecured creditor’s pro rata share of an unsecured, subordinated, non-interest bearing entitlement to receive money from Cline on the date that is eight years from the date the plan is implemented. Existing equity interests in Cline will be cancelled for no consideration.
The shares of New Elk and North Central will not be affected by the Recapitalization Plan and will remain owned by Cline and New Elk, respectively.
The implementation of the Recapitalization Plan remains conditional upon the completion of certain conditions precedent. The applicants are in the process of working towards the satisfaction of those conditions precedent and are targeting implementation of the Recapitalization Plan within the next 30 to 60 days. This process is not expected to affect Cline’s day-to-day business. Cline has access to the funding necessary to continue without disruption while the Recapitalization Plan is being executed. Cline said it intends to continue to pay employees for services rendered during implementation of the Recapitalization Plan and intends to continue paying its suppliers for goods and services purchased by Cline and its subsidiaries after Dec. 3, 2014 through the implementation period.
Cline is a Canadian mining company headquartered in Toronto, Ontario, with resource development interests in Canada, the United States and Madagascar. It owns the New Elk Coal Mine in Trinidad, Colorado. The mine has a measured and indicated metallurgical coal resource of 618.9 million tons of in-place coal. The mine had been shut for many years, revived briefly earlier this decade by Cline Mining, then shut when the market for its metallurgical coal turned bad. The money the company poured into a mine that only briefly operated was a major reason why it ran into financial problems.