Judgment for client in suit over payment of costs to relocate power lines
Blackhawk Mining Acquires Patriot Coal Corporation
In October 2016, a transaction closed in which Blackhawk Mining (Blackhawk) purchased most of the assets of Patriot Coal Corporation (Patriot) out of bankruptcy. Dinsmore served as counsel to the acquirer, Blackhawk, who had previously purchased other portions of Patriot’s assets in 2014.
The acquisition resulted from Patriot filing bankruptcy for the second time in three years, which added several layers of complexity to the transaction. Many parties were involved in the deal, including among others, the sellers, lenders, creditors, lessors, suppliers, and the United Mine Workers of America, whose existing contract with Patriot was rejected and replaced with a new contract negotiated with Blackhawk. Blackhawk’s bid was selected as the stalking horse offer, but several other interested buyers submitted competing offers, and an aggressive auction process ensued.
The total value of the transaction approached $1 billion. In addition to a multi-tiered financing structure involving the issuance of new equity securities in Blackhawk and the restructuring of Patriot’s and Blackhawk’s prior loan facilities with over $900,000,000 in new debt, the deal involved the assumption by Blackhawk of substantial reclamation and other liabilities, the posting of new bonds with state environmental authorities, and agreements to perform reclamation work on mining sites purchased from Patriot by the Virginia Conservation Legacy Fund.
“This was a very large and difficult transaction, which took months of work by numerous attorneys and staff in many departments and office locations,” said Susan Zaunbrecher, Corporate Department Chair. “The team of Dinsmore attorneys worked cohesively for our client, and, in the end, beat out a lot of impressive competition.”
Most of the six active mining complexes in the acquisition are located in West Virginia, with additional properties and mines in Kentucky, Ohio, Indiana and Illinois. Blackhawk saw the Patriot acquisition as an opportunity to expand its presence in the metallurgical coal market, as a complement to its prominent position as a producer of thermal coal.
“The demand for all coal is down significantly,” said Chauncey Curtz, Chair of the Natural Resources Group. “As a result of this deal, our client is well-positioned to survive the downturn and enjoy continued success as a low cost producer of both thermal and metallurgical coal for many years to come. That’s the most important thing to us.”
Acquisition of surface mine, deep mine, coal reserves, coal leases and mining permits
We served as deal counsel for a coal producing company in its acquisition of a deep mine and substantial coal reserves, together with a surface mine, coal and surface leases, and mining permits, for a total value of approximately $25 million. The transaction included a unique financing structure involving the acquisition of certain reserves and a leasing arrangement with third party landholding companies, as well as important labor considerations resulting from certain obligations of the Seller to the UMWA. We helped negotiate and drafted all of the documents necessary to facilitate the deal, and handled all aspects of the due diligence review including labor issues. We counseled the client through the successful closing and execution of the purchase, which will allow the client to expand its mining operations in the Appalachian coal fields.
Big Sandy Company, L.P. v. Sidney Coal Company and Cliffs Mining
Our firm represented Big Sandy, the owner of land in Eastern Kentucky, for breach of contract and other tort claims seeking proper payment of delinquent coal royalties and seeking to terminate a long term lease for failure to pay these royalties. In a split decision, an arbitration panel ruled that, while the lease could not be terminated, Sidney Coal Company had breached the lease and ordered Sidney to pay overdue royalties to Big Sandy.