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July 25, 2019 – The Debtor filed a motion requesting each of a bidding procedures order and a sale order [Docket No. 312]. The bidding procedures order would (i) approve bidding procedures for the sale of the Debtor's Western Mines and the Pax Mines (the "Sale"), (ii) approve Contura Energy, Inc. as a stalking horse in respect of the sale ( “Contura” or the "Stalking Horse Purchaser") and (iii) approve an auction and sale timetable. The sale order would authorize the Sale. One can almost hear the exhale of relief in the Debtors' motion which details Contura's $20.6mn stalking horse bid and willingness to pay a hefty 40% deposit now; cash that the Debtors urgently need to stay afloat…and employ 700 miners.
The motion states, “After weeks of negotiations with many of the Debtors’ stakeholders —including the Debtors’ prepetition senior lenders and debtor-in-possession financing lenders, Contura, the Creditors’ Committee, the State of Wyoming and the U.S. Department of Justice—the Debtors have now secured the best outcome possible under these circumstances, to the benefit of all stakeholders and employees of the Debtors, with the help and support of Contura. These negotiations culminated in the agreement between the Debtors and Contura to the terms and conditions of the sale transactions set forth in the Term Sheet (the ‘Stalking Horse Sale’), which will ensure that the Western Mines and the Pax Mines are restored to operating status and up to 700 Wyoming residents are able to continue earning regular wages in jobs associated with the mines for an estimated minimum of six to twelve years.
Pursuant to the terms of the Stalking Horse Sale and subject to Court approval and higher and better bids, Contura has agreed to purchase, and the Debtors have agreed to sell, substantially all assets associated with the Western Mines and the Pax Mines in exchange for (i) the assumption of hundreds of millions of dollars in liabilities associated with such assets, including payroll-related payments for employees returning to work in the Western Mines, and (ii) cash consideration in the amount of $20.6 million to be used to administer and keep alive the Debtors’ estates and provide cash necessary to achieve other recoveries. Critically, Contura has agreed to fund a cash deposit toward the purchase price under the Stalking Horse Sale immediately upon entry by the Court of the Bidding Procedures Order, and to allow the Debtors to use this deposit to pay anticipated expenses through the conclusion of an expedited, but efficient sale process for substantially all of their assets. The deposit will only be repaid if Contura’s bid is topped by a higher and better bid (in which case, the Successful Bidder will be obligated to repay such amounts pursuant to the Term Sheet) or if no sale of the Western/Pax Assets to any party is approved by the Court (in which case, the Debtors will return unused amounts from the deposit and Contura will have a super-priority junior secured claim against the Debtors for the balance).
The Debtors and their advisors have determined that the sale process for which the Debtors seek approval, including the terms of the Stalking Horse Sale, is the only opportunity to maximize value, avoid a permanent operational shutdown of the Western Mines and the Pax Surface Mine, return as many employees to work as possible and ensure that, ultimately, the necessary reclamation is undertaken with respect to those mines. Indeed, pursuant to the Term Sheet, Contura commits to bring back the majority of employees at the sites it seeks to purchase if the Stalking Horse Sale is consummated and assume hundreds of millions of dollars of liabilities currently burdening these assets. The transaction would further provide real value to the Debtors’ creditors through the cash consideration provided under the Stalking Horse Sale, which will be available, after satisfaction of certain administrative expenses, for distribution to the Debtors’ creditors. Moreover, Contura’s agreement to fund the sale process through a purchase deposit is absolutely critical, without which no sale process could occur and significant potential value for the Debtors’ estates would be lost altogether. The stalking horse bid and purchase deposit allow the Debtors and their advisors the breathing room necessary to allow them to focus on what is important – achieving a successful sale (or sales) and getting as many people back to work as quickly as possible. Without Contura’s agreement to the Stalking Horse Sale, including the purchase deposit to fund the sale process, none of that would be possible and the Debtors would likely be forced to immediately convert these cases to cases under chapter 7.”
Key Terms of Contura Stalking Horse Term Sheet:
Consideration: As consideration for the Western/Pax Assets, Contura will (i) pay $12.5mn in cash (in addition to the $8.1mn Purchase Deposit), (ii) assume the Western Assumed Obligations and (iii) assume the Pax Assumed Obligations.
Financing/Purchase Price Deposit: In connection with its agreement to serve as Stalking Horse Purchaser, Contura has agreed, subject to entry of the Bidding Procedures Order, to provide a cash deposit equal to $8.1 million to the Seller Parties (the “Purchase Deposit”), to be applied to the purchase price if the Western/Pax Asset Sale.
The Purchase Deposit (and any resulting Superpriority Purchase Price Claim (as defined below)) shall bear interest at a rate of LIBOR + 12.50% (LIBOR floor of 2.00%), which shall be paid in cash on a monthly basis in arrears. To the extent such Purchase Deposit (or resulting Superpriority Purchase Price Claim) or any interest on the Purchase Deposit (or resulting Superpriority Purchase Price Claim) is not paid when due, such amounts shall also bear interest at a rate of 2.00%.
- Bid Deadline: July 31, 2019
- Auction Date: August 1, 2019
- Sale Objection Deadline: August 2, 2019
- Sale Hearing: August 2, 2019
- Closing Date: August 5, 2019
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