Coal producer Walter Energy (OTC Pink: WLTG), which for the last few months has been in Chapter 11 bankruptcy protection, announced Nov. 5 that it has entered into an asset purchase agreement with a newly-formed entity capitalized and owned by members of the company’s senior lender group, pursuant to which the new company will acquire substantially all of Walter Energy’s Alabama assets.
The asset purchase agreement (APA) contemplates, among other things, cash consideration of $5.4 million, a $1.25 billion credit bid of existing indebtedness and the assumption of certain liabilities. The agreement has been filed with the U.S. Bankruptcy Court for the Northern District of Alabama in connection with a proposed, court-supervised auction process under section 363 of the Bankruptcy Code. Accordingly, the APA is subject to higher or otherwise better offers, among other conditions.
An asset sale was one of the possible means of achieving the restructuring sought by Walter Energy when it filed for Chapter 11 protection in July. Electing this path now will allow the company to continue moving forward expeditiously with its restructuring, and represents what the company believes is the best path forward in a highly challenging industry environment.
Walter Energy’s non-U.S. operations, including those in Canada and the U.K., are not included in the court filings or in the APA.
Walter Energy is a leading metallurgical coal producer for the global steel industry with strategic access to steel producers in Europe, Asia and South America. The company also produces thermal coal, anthracite, metallurgical coke and coal bed methane gas, with operations in the United States, Canada and the United Kingdom.
Company says its finances have only continued to deteriorate
The court has set an expedited hearing date of Nov. 24 for the sale motion.
Said the Nov. 5 sale motion filed with the court: “The Sale(s) of the Subject Assets are intended to preserve the jobs of a substantial portion of the Debtors’ employees, relieve the estates of substantial obligations relating to such assets (including certain reclamation obligations), reduce estates’ liabilities through the assumption and assignment of the relevant executory contracts and/or unexpired leases and avoid the further deterioration in the value of the Subject Assets—all through the prompt sale of such assets. Moreover, the Sale(s) should provide the estates with the liquidity necessary to wind down the estates in a responsible fashion, including the establishment by Buyer of certain trusts at closing for designated purposes, including the wind down of the Debtors’ West Virginia and Walter Coke operations if neither is sold to a Successful Bidder.
“The Debtors have been and will continue exposing the Subject Assets to competitive bidding through a sale and auction process pursuant to the Bidding Procedures. If no timely, conforming Qualified Bids, other than the Qualified Bid submitted by the Stalking Horse Purchaser, for the Core Acquired Assets, Blue Creek Assets and/or Miscellaneous Real Property Assets are received, there shall be no Auction for such Core Acquired Assets, Blue Creek Assets and/or Miscellaneous Real Property Assets, as applicable, and the Stalking Horse Purchaser shall be the Successful Bidder for the Core Acquired Assets, Blue Creek Assets and/or Miscellaneous Real Property Assets, as applicable. If a Walter Coke Election is not made, and no timely, conforming Qualified Bids (other than the Qualified Bid submitted by the Stalking Horse Purchaser) for the Walter Coke Assets are received, then there shall be no Auction for such Walter Coke Assets and, as provided in the Stalking Horse Agreement, the Stalking Horse Purchaser shall be the Successful Bidder for the Walter Coke Assets.
“With respect to Bids for any Non-Core Assets (other than as expressly set forth in the Bidding Procedures with respect to the minimum bid amounts for the Blue Creek Assets and the Walter Coke Assets, if the Walter Coke Election is not made), the Debtors will determine whether any individual Bid or combination of Bids is a Qualified Bid and will conduct an Auction with respect to such Bids for the Non-Core Assets as Debtors, in consultation with the Consultation Parties, deem appropriate and in the best interests of Debtors and their estates.
“Compelling business justifications exist for the proposed Sale(s). First, the Debtors do not have sufficient liquidity or access to financing to fund their operations past early 2016, let alone through a protracted and contentious chapter 11 case. As a result, and cognizant of their current monthly cash outlay, the deteriorating commodities market, continued use of cash collateral, the depletion of their assets through normal operations, the cost of fulfilling their reclamation and other regulatory obligations, and their fiduciary obligation to maximize distributable value for all creditors, the Debtors believe that a sale of substantially all of their assets offers the best available alternative at this juncture. Accordingly, the Debtors have determined that they should pursue the Sale(s) of the Subject Assets, including the Sale of the Acquired Assets to the Stalking Horse Purchaser on the terms set forth in the Stalking Horse Agreement, subject to higher and better offers as provided in the Bidding Procedures.”
Assets to be sold broken down in various “lots”
The Nov. 5 motion filed with the court breaks down the assets by these categories (known as “lots”):
Core Acquired Assets
- Alabama Underground and Gas, including Mine No. 4 and Mine No. 7
- Jim Walter Resources Mine No. 5
- Barge Loadout located in Tuscaloosa County, Alabama (owned by Walter Minerals Inc.)
- Highway 59 Mine
- East Brookwood Mine
- Blue Creek Coal Sales Inc.
- Black Warrior Methane Corp. Stock/Black Warrior Transmission Corp. Stock
- Port of Mobile Lease
- Walter Black Warrior Basin LLC
- Tuscaloosa Resources, Inc. (Swanns Crossing/Carter Mine)
Blue Creek Assets
- Blue Creek Energy Project
West Virginia Assets
- Maple Coal Co. LLC – Eagle Mine and Sycamore Mine, including the primary lease with respect to the mining property that is presently subleased from J. W. Walter Inc. (which currently holds the primary lease with Pardee Minerals Inc.)
- Atlantic Leaseco LLC – Gauley Eagle Mines
- Choctaw, Robbins Road, Reid School, Blue Ridge, Gayosa
Walter Minerals land holdings
- Alabama non-mining property interests (including the Panther and Howton mines)
J.W. Walter Inc.
- West Virginia non-mining property interests (does not include lease from Pardee Minerals which will be part of Lot 3, which is the West Virginia Assets)
Walter Land Co.
- Louisiana non-mining property interests
Select Jim Walter Resources Assets
- Mine No. 3, North River, Kellerman Prep Plant
Walter Coke Assets
- Walter Coke Inc.