Coal producer Rhino Resource Partners LP (OTCQB: RHNO) announced Sept. 30 that it has entered into an equity exchange agreement with Royal Energy Resources Inc. (OTCQB: ROYE), Rhino Resource Partners Holdings LLC, an entity wholly-owned by certain investment partnerships managed by Yorktown Partners LLC, and Rhino GP LLC, the general partner of Rhino.
Investment partnerships managed by Yorktown own substantially all of the outstanding common stock of Armstrong Energy Inc., another coal producing company with mines located in western Kentucky. The agreement contemplates that prior to closing, Yorktown will contribute its shares of common stock of Armstrong Energy to Rhino Holdings. At the closing, Rhino Holdings will contribute those shares to Rhino in exchange for 10 million newly issued common units of Rhino.
The agreement also contemplates that Rhino GP, currently owned and controlled by Royal, will issue a 50% ownership of Rhino GP to Rhino Holdings in connection with the issuance of Rhino units for the common stock of Armstrong Energy.
Closing of the agreement is conditioned upon: the current bondholders of Armstrong Energy agreeing to restructure their bonds; and Rhino refinancing its current revolving credit agreement with funds from an equity investment into Rhino to be arranged by Rhino Holdings. The agreement is also subject to other standard closing conditions and required approvals. The parties anticipate the agreement will be consummated by Dec. 31, 2016.
Rhino Resource Partners LP is a diversified energy limited partnership that is focused on coal and energy related assets and activities, including energy infrastructure investments. Rhino produces metallurgical and steam coal in a variety of basins throughout the United States.
Royal Energy Resources Inc. is a diversified energy company, with investments and holdings in coal, gas and renewable energy assets in North America. Royal is the majority equity owner of Rhino Resource Partners LP, and its general partner, Rhino GP LLC.
Armstrong Energy Inc., through its 100% wholly owned subsidiary Armstrong Coal, is a leading producer of steam coal in the Illinois Basin. Armstrong controls over 550 million tons of proven and probable coal reserves and operates six mines in western Kentucky. Armstrong ships coal to utilities via rail, truck and barge and has the capability to provide low cost custom blend coal to fuel virtually any electric power plant in the Midwest and Southeast regions of the nation.
Yorktown Partners LLC is a private investment manager founded in 1991 that invests exclusively in the energy industry. Yorktown has raised 11 private equity funds totaling over $8 billion. The investors in Yorktown’s funds include university endowments, foundations, families, insurance companies and other institutional investors.