Hartshorne wash plant sale draws objection from committee, trustee

By Sarah Lizee

Olympia, Wash., Nov. 9 – Hartshorne Holdings, LLC’s motion to sell its coal washing structures and related property located in McLean County, Ky., to Frozen Star Holdings II LLC, an affiliate of the company’s debtor-in-possession finance parties, drew objections Friday from the official committee of unsecured creditors and the U.S. trustee overseeing the case, according to filings in the U.S. Bankruptcy Court for the Western District of Kentucky.

“There simply is no reasonable basis to attempt to fast track a private sale to an affiliate of Tribeca, particularly where the proposed sale includes terms that could result in springing administrative claims, leaves the cash-strapped estate with environmental liabilities while purporting to sell the bonding collateral, and circumvents the court-approved committee settlement that would yield a percentage of sale proceeds to general unsecured creditors,” the committee said in its objection.

“The sale needs to be properly vetted by the committee and other parties in interest to ensure the integrity of the process and that it is in fact the highest and best offer for what is proposed to be sold.”

U.S. trustee Paul A. Randolph said in his objection that while he is suggesting that the proposed sale is the result of anything besides an arms length deal between the parties, in light of the fact that the purchaser is an insider and that the sale is a private sale without public bids, additional review may be appropriate.

As previously reported, Frozen Star plans to credit bid the $4.5 million purchase price on the plan effective date, under which it will be assigned $4.5 million of the $7.625 million DIP finance parties’ post-petition secured super-priority administrative expense DIP financing claim.

The DIP finance parties agreed that the DIP loan claim will be $3.125 million if the private sale is approved.

The debtors said in their motion that they do not believe that the cost and expense of running a public auction would materially increase the sale proceeds.

Rumsey, Ky.-based Hartshorne develops and operates coal mining projects in the United States. The company filed bankruptcy on Feb. 20, 2020 under Chapter 11 case number 20-40133.

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