National Coal issues stock for $2 million 10½% notes under first portion of private agreement

By Angela McDaniels

Tacoma, Wash., May 29 - National Coal Corp. issued 278,279 shares of common stock in exchange for $2 million of its 10½% senior secured notes due 2010 on Tuesday, according to an 8-K filing with the Securities and Exchange Commission.

The noteholders also received $95,083.22 of accrued interest.

The exchange was made under a letter agreement reached on May 20 with Neuberger Berman, LLC, which is representing some of its clients who hold the notes. Under the agreement, the company will issue stock in exchange for $2 million to $10 million of the notes.

For each $1,000 principal amount of notes, the holders will receive a number of shares equal to the quotient of (a) $900 plus accrued interest divided by (b) $6.81.

Settlement of the full offer will occur on or before June 3 and may occur in partial amounts on multiple dates, a previous filing noted.

The notes were sold as part of a $55 million issue of units in December 2005. Each unit included one note and one warrant to purchase about 31.5 shares of the company's stock at $8.50 per share.

The Knoxville, Tenn.-based coal producer struck a similar deal with Neuberger Berman in February. Under that agreement, National Coal said it would issue stock in exchange for $2 million to $10 million of the notes, and the number of shares issued per note was equal to 82% of par plus accrued interest divided by $4.85.

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