Black Diamond Mining files plan based on asset sale

By Caroline Salls

Pittsburgh, March 24 - Black Diamond Mining Co., LLC has filed a restructuring plan and disclosure statement with the U.S. Bankruptcy Court for the Eastern District of Kentucky with the support of its senior lenders, accounts receivable lender and several entities affiliated with the estate of Ross Harris that are the company's largest mineral rights lessors, according to a company news release.

In addition, the company said a motion to convert its bankruptcy case to a Chapter 7 liquidation has been withdrawn.

"The filing of the plan and disclosure statement, and the withdrawal of the conversion motion, represent significant steps forward in our efforts to emerge from Chapter 11," chief restructuring officer Ira J. Genser said in the release.

Under the plan, the company's senior lenders will submit a bid for substantially all of its assets, which would leave them as owners of a significant majority of the company's equity upon emergence from bankruptcy.

The lenders' bid will be subject to higher and better offers. Black Diamond said it will conduct a court-supervised auction within the next two months.

"I am optimistic that Black Diamond will exit bankruptcy as a going concern during the first half of 2009," chief executive officer and president Larry W. Hull said in the release.

Plan creditor treatment

Treatment of creditors will include:

• Holders of $75,000 in priority claims will recover 100% in distributable cash;

• Holders of $300,000 in other secured claims will recover 100% either in cash, reinstatement of the claim or the return of the collateral securing the claim;

• Reclamation claims will be assumed by the asset purchaser;

• Holders of CMS factoring and inventory security agreement claims will receive a share of $3.5 million in cash, a note secured by a lien on the inventory and accounts receivable of the buyer and the proceeds of its collateral under the factoring agreement, for a 100% recovery;

• Holders of Fifth Third secured reimbursement agreement claims will recover 100% through a payment of half the value of coal collateral, minus $3.5 million, and a secured note;

• Holders of $114.1 million in senior lender claims will have their claims reduced by the amount of any credit bid, and a portion of the claim will be reinstated and assigned to the buyer. The rest of the claim will be treated as a general unsecured claim.

However, if the secured lenders are not the high bidders for the assets, these creditors will receive cash equal to the lesser of the amount of the claim or the cash purchase price, plus excess cash;

• Holders of $20 million in senior subordinated loan claims and $38.7 million in subordinated loan claims will receive cash equal to the lesser of the amount of the claim or the cash purchase price, plus excess cash, with any remainder treated as a general unsecured claim;

• Holders of $175 million in general unsecured claims will receive a share of beneficial interests in the Black Diamond unsecured creditors trust;

• Holders of $950,000 in convenience claims will recover 5% in cash; and

• Holders of intercompany claims, old LLC interests and subsidiary debtor equity interests will receive no distribution.

Black Diamond, based in Prestonsburg, Ky., produces and markets Central Appalachian steam and stoker coal. The company filed for bankruptcy on Feb. 19, 2008. Its Chapter 11 case number is 08-70066.

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