Ranger Energy also has agreed to lease a portion of the company’s coal reserves also located on the New River Tract and to purchase the company’s coal inventory located at the Baldwin prep plant.
In addition to the proceeds from the sale, Ranger Energy will return to National Coal approximately $1.9 million in cash that was previously pledged to secure reclamation bonds and other liabilities associated with the New River Tract operation, and payment for coal inventories on the property at closing—which are expected to be minimal. Also, the company will receive from other vendors approximately $200,000 in cash that was previously pledged to secure services. Proceeds from the sale will be used to repay the $4.5 million balance due under the company’s $5 million short-term revolving credit facility, which currently is in default. Any remaining proceeds will be used to repay financing obligations for certain of the assets being sold and for other general corporate purposes.
“With this transaction, we will be able to cure the default under our short-term revolving credit facility by paying off and terminating the facility,” said Daniel A. Roling, president and CEO, National Coal. “The transaction also will allow us to pay approximately $6 million in accounts payable to our vendors, including an affiliate of Ranger Energy, most of whom extended us additional credit during the first quarter of 2010 after we experienced a reduction in cash flow following the suspension of coal purchases by our largest customer due to a force majeure event.
“We will to continue to focus on ways to reduce our expenses and our outstanding debt, as this transaction does not completely solve all of our short-term liquidity issues. We also are continuing to pursue strategic transactions that will allow us to repay our $42 million in public debt, which matures in December 2010,” said Roling.
The assets being sold include the Baldwin preparation plant, the active No. 5A underground mine, and the idled No. 3 surface mine, along with the associated permits and certain liabilities. In addition, a coal contract associated with the facilities may be assigned to the buyer. Also included in the transaction are the coal mineral rights on approximately 22,000 acres, which will be leased to Ranger Energy for a royalty of 6% to 8% of applicable revenues.
Following this transaction, the company’s continuing operations in Tennessee will include the coal mineral and mining rights to approximately 57,000 acres of land, along with mining complexes that include one active underground mine and one active surface mine. In addition, National Coal will continue to own and operate one prep plant and one unit train loading facility served by the Norfolk Southern.
