Foundation Coal amendment gets OK; new terms in effect with merger

By Sara Rosenberg

New York, May 27 - Foundation Coal Holdings Inc.'s credit facility amendment was approved by lenders and the revised terms will become operative when the merger with Alpha Natural Resources Inc. closes, according to a news release.

Under the amendment, pricing on the company's revolver and term loan A was increased to Libor plus 325 basis points from Libor plus 125 bps.

In addition, the amendment eliminates an existing covenant that limits annual capital expenditures and provides for an increase in the accordion feature to $200 million from $100 million, raising the potential revolver to a total of $700 million.

Citigroup acted as the lead bank on the amendment.

Lenders are getting a 50 bps amendment fee.

As was previously reported, Foundation Coal is merging with Alpha Natural Resources in an all-stock transaction. Foundation stockholders will receive 1.084 shares of the new company for each share of Foundation, and each share of Alpha will automatically become one share of the combined company.

The transaction is valued at about $2 billion, comprised of about 50 million new shares of the new company's common stock and the assumption of about $530 million of Foundation net debt.

As part of the merger, Foundation is leaving its $298 million of 7¼% senior notes, its $500 million revolver that was undrawn as of March 31, and its $302 million term loan A outstanding.

Alpha, on the other hand, will use available cash to repay its existing senior secured credit facility, consisting of a $375 million that was undrawn as of March 31 and a $233 million term loan facility.

Alpha will also preserve its 2.375% convertible senior notes and seek to upsize its $85 million accounts receivable securitization facility.

Closing of the merger is expected to take place later this year, subject to approval of each company's stockholders and other customary conditions, including regulatory approvals.

The combined coal producing company will retain the Alpha name and will have headquarters in Abingdon, Va.

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