Relevant Document:Sale Motion
On Wednesday, the Mission Coal debtors filed a motion seeking authorization of bidding procedures for the sale of substantially all the debtors' assets and to enter into and perform under a stalking horse purchase agreement with their current DIP lenders. The motion also seeks the approval of certain bid procedures. The bid would cover various mining locations and related assets but specifically excludes pension-related assets and would require that the debtors’ collective bargaining agreement be rejected or its successorship clause waived. The stalking horse asset purchase agreement has not yet been finalized, according to the motion.
The debtors’ DIP lenders have agreed to provide the stalking horse bid to set the “floor price” for certain of the debtors’ assets.
The motion states that the proposed purchase price is a credit bid of $145 million. In addition, the bid contemplates the funding of certain wind-down expenses, and prior to the hearing approving the sale (which is tentatively scheduled for March 20, 2019), the debtors and the stalking horse bidder will come to an agreement “on the amounts of various escrow accounts necessary to fund professional fees, pre-closing payroll obligations and chapter 11 administrative expenses and wind-down costs.” The filing adds that the stalking horse bid does not provide for bid protections of either a breakup fee or expense reimbursement.
The motion appears to leave room for the DIP lenders to increase their credit bid in response to a competing proposal. It notes that the DIP lenders, as stalking horse bidder, have the right, including as part of any overbid, “to credit bid all or a portion of the value of the secured portion of [their] claims for the Assets pursuant to Bankruptcy Code section 363(k), including any secured claims on account of its adequate protection liens, which amount shall be no less than approximately $203,340,782, plus all accrued and unpaid interest.”
The sale motion outlines the following assets that would be acquired by the stalking horse purchaser:
- All assets related to the operations of Maple Eagle (West Virginia) and Oak Grove (Alabama) mining facilities; and
- Certain assets of Pinnacle, explaining that the buyer “has the right between signing and closing to determine what assets of Pinnacle and Seminole Alabama that it will acquire.”
The filing explains that the specific assets being acquired by the stalking horse purchaser would include the following:
- “Inventory and Equipment
- Assumed Contracts (for which it will pay cure costs)
- Owned and leased real property
- Coal reserves related to the acquired mines
- Cash, including cash collateral used to secure surety bonds associated with acquired assets, and Accounts Receivable
- Certain Avoidance Actions against trade creditors
- Insurance Policies
- Proceeds from the sale of any Excluded Assets other than Avoidance Actions up to a permitted amount
- Claims of the Company against third parties.”
The stalking horse asset purchase agreement is conditioned on, among other things, “the [United Mine Workers of America] waiving the successor clause in the CBA or the Bankruptcy Court approved the rejection of the CBA” (emphasis added). This requirement is consistent with
prior disclosures in the case.
In addition, the sale motion makes clear that the buyer
will not be acquiring “certain assets, namely assets under benefit plans, employee records and files, tax returns, the North River Mine and Kellerman Mine, and any entities (subsidiaries).” According to the sale motion, the stalking horse purchase would be assuming certain liabilities of the debtors’ business, including liabilities for reclamation under transferred permits, reclamation at Pinnacle (unless another buyer purchases and assumes that), assumed contracts and any cure costs associated with them, outstanding trade payables in accordance with the DIP budget, transfer taxes and accrued and unpaid real property taxes.
In a footnote, the debtors state that at the time the sale motion was filed, the stalking horse purchase agreement “has not yet been finalized and the terms described herein are subject to material revision in connection with the ongoing negotiations regarding the Stalking Horse Purchase Agreement.”
The motion attaches a current draft of the agreement that is the version proposed by the debtors, adding that the stalking horse bidder “has not consented to certain items as reflected in the Stalking Horse Purchase Agreement, and all of the Debtors and the Stalking Horse Bidder’s respective rights are hereby reserved in full” (emphasis added). The attached agreement includes relevant terms related to the proposed bidding procedures, including terms related to minimum overbids.
“To further ensure that the Debtors’ proposed Auction and sales process maximizes value for the benefit of the Debtors’ estates, the Debtors will use the time following entry of the Bidding Procedures to continue the process, initiated shortly after the Commencement Date, to actively market their Assets,” says the motion.
The motion along with the attached notices set forth the following proposed sale schedule:
- Jan. 21, 2019, at 5 p.m. ET: The deadline by which all qualified bids must be actually received by the parties specified in the bid procedures.
- Jan. 25, 2019, at 5 p.m. ET: The deadline by which the debtors will determine which bids are qualified bids and notify each potential bidder in writing whether such potential bidder is a qualified bidder.
- Feb. 25, 2019, at 5 p.m. ET: The date by which the debtors will provide the stalking horse bidder and each qualified bidder “a schedule setting forth (i) the highest or otherwise best fully binding offer for the Assets and/or (ii) the highest or otherwise best fully binding offer(s) for all or any portion of the Assets.”
- Feb. 27, 2019, at 11 a.m. ET: The date and time of the auction, if necessary.
- March 6, 2019, at 5 p.m. ET: The sale objection deadline. This includes objections to any successful bids or any assigned contract objection.
- March 15, 2019, at 5 p.m. ET: The deadline for filing responses to the objections to the sale.
- March 20, 2019, at 11 a.m. ET: Sale hearing.
The motion also provides a summary of the assumption and assignment procedures contemplated by the debtors.
In asserting that time is of the essence, the debtors stress that they “face important milestones and deadlines under the DIP Facility that, absent extension, could lead either to the Debtors having to cease operations or incur significant expense to refinance the DIP Facility.” The filing adds that at the same time, the debtors “seek to minimize the time and expense in chapter 11, and ensure sufficient liquidity to fund their chapter 11 process.” The debtors contend that the proposed sale would “resolve these chapter 11 cases, cut off the expense of bankruptcy, and permit the Debtors to distribute the value generated by the sale of assets to their stakeholders.” According to the filing, the debtors “hope and expect to continue discussions with creditors regarding their sale and restructuring efforts and obtain substantial consensus regarding the chapter 11 process quickly.”
The motion states that the debtors “have determined, in the exercise of their business judgment, that the best way to maximize the value of their assets for all stakeholders is to market-test the Stalking Horse Bid through an auction process and to expeditiously sell the assets to the highest or otherwise best bidder (or bidders).”
In a footnote, the sale motion states, “The Debtors anticipate filing a disclosure statement (the ‘Disclosure Statement’), a chapter 11 plan (the ‘Plan’), and a motion for approval of the Disclosure Statement on December 17, [2018], which will set forth the contemporaneous Plan confirmation schedule and will propose that the approval of the Sale occur in connection with approval of the Plan at the confirmation hearing.”
The court entered
an order granting the debtors’
motion to shorten notice, setting an objection deadline of Dec. 16 at 5 p.m. ET and a reply deadline of Dec. 18 at 1 p.m. ET. The sale motion hearing is scheduled Dec. 19 at 11 a.m. ET.