April 1, 2020 – The Court hearing the Murray Metallurgical Coal Holdings cases has approved the $31.0mn sale of Murray Maple Eagle Coal, LLC (“Maple Eagle Assets”) to stalking horse Panther Creek Mining, LLC (the “Buyer”) [Docket No. 326]. The stalking horse asset purchase agreement is attached to the Debtors' bidding procedures motion motion as Exhibit 1 [Docket No. 60]. The Buyer is one of nine mining complexes owned by Lexington, Kentucky based Blackhawk Mining, LLC ("Blackhawk").
On March 23, 2020, further to the Court's March 12th bidding procedures order [Docket No. 245], the Debtors notified the Court that it had cancelled the auction scheduled for March 24th and designated the stalking horse as the successful bidder [Docket No. 288]. In advance of the scheduled auction, the Debtors had considered two other bids, but "by close of business on Monday, March 23, 2020, the parties that submitted the Bids were unable or unwilling to modify their proposals such that the Debtors would declare them to be Qualified Bids."
The purchasers of the Maple eagle Assets know something about bankruptcy and distressed coal assets. On November 5, 2019, after a last minute redraft of their Plan to reflect the drop of coal prices and the need for an addition $35.0mn of debtor-in-possession ("DIP") financing, Blackhawk emerged from its own bankruptcy having shed $1.0bn of debt and owned by prepetion first and second lien term loan lenders.
In January 2020, the Buyer filed a WARN layoff notice in respect of 65 employees.
The Debtors' bidding procedures motion [Docket No. 60 which attaches the APA] states, “The Debtors commenced these chapter 11 cases to achieve three main goals. First, the Debtors intend to facilitate the consensual sale (the 'Sale') of substantially all of the assets of Murray Maple Eagle Coal, LLC ('Maple Eagle') pursuant to section 363 of title 11 of the United States Code (the “Bankruptcy Code”), which will maximize value for the benefit of all stakeholders. Second, the Debtors intend to effectuate a sale of their remaining operations, which is premised on the continued and future operation of the Oak Grove…mining complex. And, third, the Debtors intend to ensure that they can continue to comply with their remediation obligations at the North River mining complex.
The Maple Eagle Sale is a critical element of the Debtors’ overall restructuring. Pursuant to the Restructuring Support Agreement, dated February 11,2020 (the 'RSA'), among the Debtors and their principal stakeholders, the Debtors agreed to pursue a Sale of Maple Eagle pursuant to Bankruptcy Code section 363. As set forth in the RSA, (i) the funding of the junior debtor in possession facility (the 'Junior DIP Facility') is expressly conditioned upon the execution of a Stalking Horse Purchase Agreement (as defined herein) and (ii) any net proceeds from the Sale will be used first to repay the Junior DIP Facility. This Motion seeks relief from the Court to (i) authorize Maple Eagle to enter into the Stalking Horse Purchase Agreement, which, among other things, will allow the Debtors to receive the funds from the Junior DIP Facility and (ii) approve the proposed bidding procedures and mechanics surrounding the Auction (as defined herein), if an Auction ultimately proves necessary.
Prior to the commencement of these chapter 11 cases, the Debtors have been engaged in a marketing process for the Maple Eagle complex, which has involved numerous potential purchasers. That marketing process resulted in an offer being made for the Maple Eagle complex in mid-January. Following discussions regarding the Debtors’ need for a comprehensive process to effectuate their restructuring, the Buyer has agreed to provide the Stalking Horse Bid to set the floor price for Maple Eagle’s assets pursuant to the terms of the Stalking Horse Purchase. While the Debtors believe the assets have already been subject to a full marketing process, the Debtors have determined, in the exercise of their business judgment, that the best way to maximize the value of Maple Eagle’s assets for all stakeholders, and to ensure that the process is fair to all constituents, is to market-test the Stalking Horse Bid through an auction process and, if no other bids are received, to expeditiously sell the assets to the Stalking Horse Bidder without delay.
The Sale of Maple Eagle is one element of a carefully constructed restructuring of six entities that own three Mining Complexes. The Debtors face important milestones and deadlines under the DIP Facility and RSA. At the same time, the Debtors seek to minimize the time and expense of these chapter 11 cases, so as to ensure sufficient liquidity to fund the chapter 11 process. The proposed Sale will yield much-needed certainty as to the value of Maple Eagle, with the liens on Maple Eagle attaching to any proceeds of the Sale…pursuant to the RSA, any proceeds of the Sale must be used first to pay down the Junior DIP Facility.
The Debtors believe an expeditious Sale process for Maple Eagle will serve as a cornerstone of their restructuring and maximize the ultimate value realized by their stakeholders. Moreover, the Debtors believe the establishment of Bidding Procedures, entry into the Stalking Horse Purchase Agreement, and the related relief requested in this Motion are in the best interests of the Debtors’ estates and their stakeholders.”
Key Terms of the Stalking Horse Purchase Agreement:
- Purchase Price:
- Cash Component: $750,000
- Assumed Liabilities: approximately $30.0mn
- Bid Protections: Break-up fee of $250k and expense reimbursement of up to $500k.
- Acquired Assets: The Stalking Horse Bidder will acquire all of Maple Eagle’s right, title and interest in those assets primarily related to the Maple Eagle No. 1 underground mine, the Sycamore surface mine, the Maple Eagle/Katie preparation plant, and any other facilities primarily related to the foregoing, including all primarily related inventory, equipment, contracts, owned and leased real property, intellectual property (other than Murray Brand IP), prepaid expenses, Transferred Permits, insurance proceeds, and proceeds of the Acquired Assets.
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