Judge Frank Volk for the U.S. Bankruptcy Court for the Southern District of West Virginia has approved Eagle Specialty Materials, LLC (ESM) as the buyer of Blackjewel's western assets including the Belle Ayr and Eagle Butte mines. ESM is an affiliate specifically formed by Ohio-based FM Coal to purchase the assets.
"ESM is the only buyer that has the necessary agreements with Contura, can demonstrate the necessary support of the key regulatory agencies, and is offering satisfactory consideration so that the sale can close by that date," read an affidavit by debtor-in-possesion Blackjewel.
Contura Energy, as the stalking horse bidder, won the previous auction over 17 submitted offers. Company leadership has stated it had a short-term mining plan for the western assets, with an eye towards developing its eastern metallurgical coal operations.
Contura will pay $90 million and waive over $3 million in a purchase deposit in order to transfer about $230 million in obligations including clean-up costs to Eagle Specialty Materials.
In Blackjewel's affidavit, attorneys highlighted "challenges" in the sale process with Contura. In comparison with past offers and with cash on the mind, Blackjewel decided to sell the western assets in a private sale rather than pursue another auction.
Blackjewel attorney Stephen Lerner said there was a proposal from Aspen, the back-up bidder, to buy western assets, but that it didn't measure close to the ESM deal.
"There were no other parties who provided offers that were acceptable to the debtors," he said.
Lerner lauded the deal with ESM deal for bringing in substantial cash while relieving the estate of liabilities, but he said it's a good deal for other reasons, too.
"There are a number of settlements all of which we believe based upon the evidence before court... that will provide substantial benefits to the estate," Lerner said.
That includes a resolution of payment of worker obligations, a lien dispute between Riverstone Credit Partners and Contura Energy, money owed by Blackjewel Marketing and Sales (BJMS), the "Hot Goods" issue and payroll with the Labor Department. The deal also negotiated the money to pay Riverstone $32 million due to its senior secured lien.
Campbell County Commissioners also agreed to a deal that would pay the county only half of 2019 ad valorem taxes owed in order to make workers whole again for pre-petition obligations, including payments into Health Savings Account, payroll, and 401 (k) accounts.
As of today's hearing, ESM has promised $1.8 million not only for pre-petition obligations but also post-petition as well. That means medical claims could be included, though still with a $1.8 million cap.
Judge Volk questioned Lerner to ensure furloughed workers would have the opportunity to return. Lerner said all hourly workers will be offered positions with over 500 opportunities to return to the mines.
The judge also asked how much overlap there would be of Contura management with ESM and whether it had a long-term mine plan.
Lerner said there would be some overlap as ESM won't have full control or ownership of the mines until a surety bond transfer and permit transfer was complete.
But he said, it's still the best possible deal he's seen.
"This transaction, because of all the settlements that are associated with it, provides much greater certainty now than we ever would have had if the Contura deal had gone through."
Not Done Yet
Time is of the essence for Eagle Specialty Materials. In the Blackjewel's affidavit, attorneys explained that's due to customers who require its coal.
"If the closing is delayed beyond October 7, 2019, the parties believe that there is a significant risk that the contracts with the end-users of the coal produced at the Belle Ayr and Eagle Butte mines could be terminated and significantly damage the value of the Western Assets and put the sale to ESM at risk," it reads.
The timeline was brought up several times as objections came up in the hearing. Komatsu Mining Corporation, for example, objected to the sale of two shovels in the west free and clear of its lien.
Campbell County attorneys also pushed back on ESM and the debtors for not including them in negotiations. The details of the deal were only added to the docket last night according to the attorneys. They had no objection.
The judge approved the sale of Blackjewel's western assets to Eagle Specialty Materials with expected changes to the deal. Nothing will change on the ground until the deal closes. The permit and surety bonds will both need to be transferred and replaced.
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