CCR will combine the assets of Bowie, the marketing and logistics platform developed by Bowie, MEC’s management and operational expertise and coal from MEC’s Lila Canyon mine, and the coal marketing expertise of Javelin and CLISA to create a western U.S. bituminous coal producer and marketer.
The partnership will operate three underground coal mines in Utah — the Sufco mine, which produced 5.4 million tons in 2016, the Skyline mine (4.5 million tons) and the Dugout Canyon mine (650,000 tons in 2016). The Lila Canyon mine produced 1.6 million tons in 2016 and currently has 42.3 million tons of coal reserves.
MEC will hold a 30.5% stake in CCR. Chairman of Bowie John Siegel will also control 30.5%, and 28.5% will be held by second lien lenders via warrants. Javelin and CLISA will control 7.25% and 2.25%, respectively. Javelin is headquartered in the U.K. and CLISA is a trading and investment group based in Mexico with a focus on the energy industry.
“We are very familiar with Bowie’s coal mines and with coal markets both domestically and internationally,” said Robert E. Murray, chairman, president and CEO of MEC. “We believe that this partnership will generate tremendous cost synergies, which will allow these mines to be extremely competitive in the domestic and international coal marketplace.”
CCR will purchase and market coal produced from Lila Canyon. Through a services agreement, MEC will provide certain operational, procurement and administrative services for CCR. The CCR investors expect to finance a portion of the partnership, and pay related fees and expenses, with the proceeds of debt financing. A portion of these proceeds will be used to recapitalize Bowie’s existing capital structure. Jefferies is acting as sole financial advisor on the transaction.
“The combination of the uniquely contracted assets, export capacity and workforce of Bowie, with the Lila Canyon mine, buying power and consolidation experience, will produce an excellent platform for performance and growth,” Siegel said. “Murray Energy… has been successful in consolidating three major mining complexes in the United States and creating synergies. We are looking forward to working with them to ensure that these mines become even more competitive in the domestic and international marketplace.”
In connection with the transaction, Bowie will refinance its existing senior secured credit facilities with new debt financing. Specifically, Bowie Resource Holdings LLC and Canyon Finance Corp. intend to offer up to $375 million of senior secured notes due 2022 through a private placement. Bowie intends to use the proceeds to refinance its existing senior secured credit facilities and finance the acquisition of Bowie by CCR. In addition, Javelin and CLISA will contribute cash to CCR in exchange for equity in CCR and certain exclusive export marketing rights. Jefferies is acting as sole initial purchaser and book-runner for the notes.