Foresight begins talks with bondholders in effort to resolve lawsuit

By Wendy Van Sickle

Columbus, Ohio, Dec. 7 – Foresight Energy LP said it has begun talks with a majority of the holders of its senior notes due 2021 to attempt to resolve pending litigation and spelled out a worst-case scenario that would result in the partnership’s inability to fund its operations in a Monday press release.

As previously reported, in May 2015 the notes trustee filed suit in the Delaware Court of Chancery claiming that Murray Energy Corp.’s acquisition of a 34% non-controlling interest in Foresight Energy GP LLC and of an option to purchase an additional 46% interest in Foresight triggered a change of control under the notes’ indenture, requiring the partnership to offer to purchase the notes at 101 plus accrued interest.

On Friday, vice chancellor J. Laster of the Delaware Court of Chancery issued his opinion, but not a judgment, that an event of default had occurred and that the trustee was entitled to an order requiring Foresight to offer to purchase the notes. A judgment in the case has not yet been rendered.

“Counsel for a majority of the bondholders has communicated to us that, in light of ongoing settlement discussions, such majority bondholders do not intend to instruct the trustee to accelerate the debt,” the release states. “Accordingly, we can provide no assurances that they will not ultimately seek acceleration of the debt in the near future or that settlement negotiations will be successful. In addition, we have commenced discussions with certain lenders under our revolving credit facility to ensure that we have sufficient liquidity to fund our cash operating costs.

“In light of the current conditions and uncertainties, including continuing operational and market challenges and uncertainties regarding the outcome of the litigation and its impact on our liquidity, we are pursuing options to preserve liquidity, and it is likely that we will suspend the distribution on our common units, commencing with the quarter ending Dec. 31, 2015.”

The company said that if its debt is not accelerated and with continued lending from its revolving credit facility lenders, it believes it will be able to meet its obligations as they become due.

“If discussions with the bondholders are unsuccessful, it could result in an adverse judgment being rendered. We would seek to get such order stayed while the order is appealed to the Delaware Supreme Court, but such a stay could require posting of a bond,” the press release continues.

Foresight said its ability to post a bond would depend on the bond’s size and the liquidity the company has available at the time.

“If an adverse judgment is rendered and we are unsuccessful on appeal (or in getting the judgment stayed while we appeal), the obligation to pay the senior notes may be accelerated and we may be in default under our other indebtedness and we will continue to pursue all of our options,” the press release states. “In addition, if our revolving credit facility lenders are unwilling to lend us sufficient cash to fund our cash operating costs, we may be unable to fund our existing operations.”

Foresight is a coal producer based in St. Louis.

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