Lily filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the Southern District of Indiana in Indianapolis on September 23, barely a week after the company’s only mine, the Landree continuous miner operation in Greene and Sullivan counties, was idled. Landree produced coal sporadically after its early 2013 startup, turning out only 21,674 tons through three quarters, according to the federal Mine Safety and Health Administration. The mine’s high point came in the second quarter when it produced about half of its total tonnage for the year. Most of the roughly 40 or so miners who worked at Landree have been laid off.
Through its LC Energy Holdings LLC assignee, New York-based hedge fund Platinum Partners Credit Opportunities Master Fund LP was designated in late December by Lily as a qualified bidder in the January 14 auction set by Judge Frank J. Otte. The auction was to take place in the Indianapolis law office of Lily’s legal counsel, Tucker Hester Baker and Krebs.
No “stalking horse” bidder was selected by the court’s December 27 deadline, although that could change prior to the auction. Platinum Partners has served as Lily’s debtor-in-possession lender since the coal company’s bankruptcy filing.
Third Set Advisors LLC, formed by central Appalachian coal producer Quest Energy to acquire Lily, previously was identified as a likely bidder for Lily as well.
Third Set Advisors had objected to Lily’s proposed bidding procedures.
In his order, the judge said the bidding procedures would not affect Indianapolis Power & Light Co.’s (IP&L) rights “to the assumption or the assumption and assignment” of an amended three-year coal supply agreement with Lily.
IP&L, an AES Corp. subsidiary, has asked the court for permission to terminate a contract under which Lily originally was supposed to supply 200,000 tons of Landree coal in 2012 and 400,000 tons in both 2013 and 2014. The arrangement was amended several times, however, to reduce the scheduled amounts from Landree.
The utility has said it no longer has confidence that Lily can perform its contractual obligations.
Lily has said in court filings it is willing to see its assets for prices ranging from $8 million to $12 million. It was unclear how much the auction could earn for the company’s creditors.
According to the court-approved bidding procedures, Lily will review the bids and announce the highest and best bid as the “successful bid” and the next highest as the “runner-up bid.” The successful bidder is required to post a $100,000 good faith deposit, “which shall be wired, in immediately available funds, to an escrow agent” of Lily’s choosing pursuant to an escrow agreement acceptable to Lily and the successful bidder.
On January 15, the judge will conduct a public hearing in Indianapolis on the sale motion and any objections raised as a result of the formal bidding process. The sale is expected to close during the first quarter of 2014.
