The Foundation PA Coal Co. LLC subsidiary of Alpha Natural Resources on Dec. 3 asked its bankruptcy court for permission to sell, over time, its shares of a company called Rice Energy Inc.
Rice Energy is an independent natural gas and oil company engaged in the acquisition, exploration and development of natural gas and oil properties in the Appalachian Basin.
Alpha and subsidiaries on Aug. 3 filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court for the Eastern District of Virginia. Alpha, one of the nation’s largest coal producers, is looking to sell off non-core assets as it looks to reorganize.
Foundation Coal is seeking the entry of an order authorizing it to implement procedures (called the “Stock Disposition Procedures”) by which Foundation Coal, from time to time and in its discretion, may sell certain common shares of Rice Energy, an unaffiliated non-debtor entity, in open market transactions, without need for further court approval for each transaction. In addition, Foundation Coal seeks authority to pay any applicable stockbroker commissions and/or fees related to any sale of Rice shares.
During the first quarter of 2014, Foundation Coal agreed to transfer its 50% interest in an affiliated entity, Alpha Shale JV, to Rice Energy in exchange for 9,523,810 shares of Rice Energy common stock and $100 million in cash consideration. As a result of that transaction, Foundation Coal owned, and continues to own, a significant amount of Rice Shares. Rice Shares are publicly traded on the New York Stock Exchange (NYSE) under the symbol RICE.
Since Foundation Coal acquired the Rice shares in 2014 and up until the bankruptcy petition date, Foundation Coal has sold these the Rice shares over time to monetize them in a prudent manner without adversely impacting the market for such shares. In addition, Foundation Coal participated in a marketed offering of shares in August 2014 where it sold 3,114,825 Rice shares. Currently, a Rice share sale proceeds cccount holds cash totaling approximately $39.5 million. Foundation Coal also continues to hold 4,016,146 Rice shares, with a market value of approximately $54 million based on the market price of $13.48 per share as of the close of business on Nov. 30, 2015.
Foundation Coal said it does not plan to maintain the Rice shares as a long-term investment and, absent the filing of the Alpha bankruptcy cases, would have continued to liquidate its position. Foundation Coal said that such sales are best accomplished opportunistically depending on the state of the market and other factors. It said an immediate sale of all remaining Rice shares could flood the market and adversely impact share price.