In late June filings with the U.S. Bankruptcy Court for the Eastern District of Kentucky, Trinity asked the court to establish a series of dates and deadlines that could result in the purchase of all or some of its assets. Trinity requested a preliminary bid deadline of July 19, a deadline of July 26 by when all qualified bidders must submit final offers, and a July 30 auction at the offices of its legal counsel, Bingham Greenbaum Doll LLP in Lexington, Ky. The court also was asked to schedule an August 8 sale hearing at which time deals could be approved.
In February, creditors of India-based Essar filed involuntary Chapter 11 bankruptcy petitions against Essar’s U.S. subsidiaries, primarily Trinity, claiming they owed in excess of $100 million in unpaid bills. Trinity, acquired by Essar for $600 million in 2010, is a Central Appalachian coal producer with holdings in Breathitt, Floyd, Knott, Magoffin and Perry counties in eastern Kentucky and Boone, Fayette, Mingo, McDowell and Wyoming counties in West Virginia. The company’s operations have produced both steam and metallurgical coal, although only the Deep Water met coal complex in Fayette County currently is in production. The other operations have been temporarily idled.
The creditors—Credit Agricole SA, ING Group NV and Natixis—also joined a separate involuntary Chapter 11 suit filed in the Lexington court by three Frasure Creek Mining creditors: Austin Powder Co., Cecil I. Walker Machinery and Whayne Supply Co. They allege Frasure Creek owes them more than $20 million for goods, services and parts they provided. Frasure Creek is a Trinity affiliate.
In early July, Trinity and its affiliates were negotiating with multiple unidentified parties to be a “stalking horse” bidder for their mining assets. Initially, more than 60 potential buyers were solicited by Trinity, “including competitors as well as other strategic and financial investors,” Trinity said in a court filing. More than 30 prospective purchasers then entered into so-called non-disclosure agreements and performed varying degrees of due diligence, including management presentations and site visits to the various mining complexes.
According to the filing, Trinity and its affiliates received first round, non-binding proposals from 14 potential buyers across all six mining complexes. After fielding the offers, Trinity, its affiliates and their advisers invited some of the potential buyers to return for a second round bid “and submit concrete binding offers and thereby compete to be a ‘stalking horse’ for some or all of the debtors’ assets.”
After that, several additional potential purchasers, who also were not identified, approached the debtors and their advisers “and commenced to negotiate for the purchase of all or some of the debtors’ assets,” Trinity added in the filing.
The Deep Water complex in West Virginia had total estimated coal reserves of approximately 70 million tons as of March 31. Currently, about 40,000 tons tons of met coal are mined monthly. Deep Water consists of one active surface mine with multiple units, two active highwall miners and two idled underground mines. The North Springs complex in McDowell, Mingo and Wyoming counties in West Virginia produced compliance steam coal and high volatile “B” quality met coal when it was operating. It has about 16.1 million tons of estimated reserves, most of which is met coal.
The Falcon complex in Boone County, W.Va., controls an estimated 6.2 million tons of low-sulfur steam coal. Prater Branch, in Magoffin and Floyd counties in eastern Kentucky, has an estimated 18.3 million tons of lower-sulfur steam coal. Little Elk, a mid-sulfur steam coal complex in Perry County, Ky., controls an estimated 11.9 million tons of coal reserves.