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December 9, 2020 – The Debtors requested each of a bidding procedures order and a sale order [Docket No. 44]. The bidding procedures order would (i) approve bidding procedures, including bidder protections for any selected stalking horse, in respect of a sale(s) of the Debtors Millennium Assets (the “Sale”) and (ii) approve a proposed auction/sale timetable culminating in a January 4, 2021 auction and a January 5, 2021 sale hearing. The sale order would approve the Sale.
The assets to be sold are “substantially all of MBTL’s, Barlow Point’s, and Columbia Land’s (collectively, the ‘Millennium Debtors’) assets that comprise the Millennium Facility [ie, a 540-acre zoned heavy industrial site connected to an aquatic lease allowing for three docks in Cowlitz County on the Columbia River in Longview, Washington]."
The Debtors have an accelerated sale timetable and no stalking horse, although they have received a term sheet from a potential buyer. The need for an accelerated timetable seems genuinely based on a dire liquidity position with failure to identify a stalking horse by December 16th leading to a cessation of the Debtors' sales efforts and a likely motion to request dismissal of conversion of their Chapter 11 cases.
The bidding procedures motion explains, “The Debtors commenced these chapter 11 cases in accordance with a Restructuring Support Agreement with the goal of completing their mining activities, beginning the reclamation process, and monetizing their assets in order to maximize value for the benefit of the estates and their constituencies, which process includes selling certain assets pursuant to section 363 of title 11 of the United States Code. The Debtors are pursuing the sale of two distinct sets of assets and operations in their chapter 11 cases.
This Motion seeks approval of the bid procedures and ultimate sale of the Millennium Assets, as defined below, which include a ground lease and aquatic lease in Longview, Washington, as well as other real property, buildings, structures, and assets. Prior to the Petition Date, the Debtors received a term sheet to buy some of the Millennium Assets, but did not have enough time to consummate a transaction before filing these chapter 11 cases.
To effectuate a sale of the Millennium Assets as efficiently as practicable, the Debtors seek to establish Court-approved bidding procedures for a sale of substantially all of the Millennium Assets, which will build on any prepetition momentum and facilitate an open, orderly, and efficient process for the solicitation and evaluation of bids during these chapter 11 cases. To further increase the competitiveness of the bidding process, the Debtors seek authority to select one or more parties to act as a stalking horse bidder and to provide any such stalking horse bidder with bid protections in the form of a breakup fee and reasonable and documented out-of-pocket fees as set forth in the Stalking Horse Agreement to be filed with the Court (the 'Bid Protections'). The proposed bidding procedures and sale schedule are critical to achieving the Debtors’ paramount goal of maximizing the value of their estates for the benefit of their stakeholders. Importantly, the Debtors’ Prepetition Secured Lenders (as that term is defined in the First Day Declaration) support the sales and marketing process for the Millennium Assets, including the proposed bidding procedures and sale schedule…
Prior to filing these cases, the Debtors initiated efforts to sell the Millennium Assets by retaining Jones Lang LaSalle Americas, Inc. (‘JLL’) to market the Millennium Assets.…Just prior to the Petition Date, the Debtors received a term sheet via JLL from a potential buyer including terms to purchase some or all of the Millennium Assets….JLL and the Debtors are actively continuing to engage with several potential purchasers, one of which may be designated as a Stalking Horse Bidder (defined below).
It is crucial for the Debtors to name a Stalking Horse Bidder on or before December 16, 2020 (the ‘Stalking Horse Bid Deadline’). The Debtors do not have sufficient cash collateral to maintain the Millennium Assets for the duration of a sale process without the guarantee of a buyer at the end of that process. Thus, if the Debtors do not have a Stalking Horse Bid (defined below) by the Stalking Horse Bid Deadline, the Debtors intend to withdraw this motion, reject the leases associated with the Millennium Assets, and proceed with either a dismissal of the Millennium Debtors or a conversion of their cases to chapter 7 of the Bankruptcy Code.”
Proposed Key Dates:
- Stalking Horse Bid Deadline: December 16, 2020
- Bid Deadline: December 30, 2020
- Auction: January 4, 2021
- Sale Objections if Other Bidder Successful: January 5, 2021
- Sale Hearing: January 5, 2021
The Court scheduled a hearing on the motion for December 22, 2020, with objections due by December 21, 2020.
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filings (the “Adlard Declaration”) [Docket No. 3], Darrin T Adlard, the Debtors’ Vice President of Finance and Accounting and Treasurer, detailed the events leading to Lighthouse’s Chapter 11 filing. The Adlard Declaration provides: “The Company has focused on sales to the Indo-Pacific Region where demand for thermal coal in Asia has been increasing and port access for coal from the West Coast of the United States has been limited.
Lack of port capacity from the West Coast of the United States has restricted access from the Decker Mine and other producers in the West to growing demand in Asia.
Lighthouse has been working for over eight years to permit the CET [the coal export terminal, aka the “Millennium Facility,” which has struggled to obtain required regulatory permits]. It was hoped that the CET would provide improved access for Debtors to ship their coal to Asian markets and lead to an increase in production.
In the years leading up to the Petition Date, the price for thermal coal in the United States has been impacted by decreased demand in the United States and Europe. Recent prices in Asia have been impacted by the COVID-19 global pandemic with the associated decrease in industrial and business activity due to government-imposed restrictions. Due to decreased prices in Asia connected to the COVID-19 global pandemic, Decker Coal has experienced a drastic reduction in export sales this year due to an oversupplied market.
Coal production in the United States for Q2 2020 was the lowest it has been in almost 50 years.
All of the economic and regulatory issues in the thermal coal space, combined with those specific to the Debtors, have caused a liquidity crisis and the need for the relief sought in these Chapter 11 Cases.
On October 1, 2020, the Prepetition Secured Lenders notified the Debtors that they would no longer provide any more funding and, as noted above, gave notice to the Debtors that they deemed the Prepetition Loans due and owing as of September 30, 2020.”
About the Debtors
According to the Debtors: “Lighthouse Resources Inc. is an infrastructure and resource management company, integrating resource assets, export channels and marketing expertise to serve domestic customers and Asian trade allies. The company owns and operates thermal coal mines in and around the Powder River Basin and is developing port export infrastructure in the US Pacific Northwest.
The company is privately held and headquartered in Salt Lake City, Utah."
The Declaration adds: "…the coal-side Debtors, LHR Coal and its subsidiaries, operate the Decker Mine in Montana, and LHR Coal subsidiary, KCP, is a fifty percent (50%) owner of the Black Butte joint venture that mines coal in Wyoming. The Debtors produce subbituminous thermal coal with low sulfur content, which they sell to domestic and foreign markets, with a foreign focus on Asia. Thermal coal is primarily consumed by electric utilities and industrial companies as fuel for electricity generation.
The non-coal Debtors, LHR Infrastructure and its subsidiaries, also operate the Millennium Facility in Washington State."
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