for the northern district of alabama southern...

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

) Chapter 11 In re: ) ) Case No. 18-04177-TOM11 MISSION COAL COMPANY, LLC, et al.,1 )

) (Jointly Administered Requested)

Debtors. ) )

STIPULATION RELATED TO MOTION TO ASSUME OAK GROVE COAL MINING LEASE AND OBJECTION OF NATURAL RESOURCE PARTNERS, L.P. TO THE

INTERIM ORDER AND MOTION FOR ENTRY OF A FINAL ORDER AUTHORIZING POSTPETITION SECURED FINANCING

This stipulation (the “Stipulation”) is entered into this 15th day of November, 2018, by and

among Oak Grove Resources, LLC (“Oak Grove”) and its affiliated debtors and debtors-in-

possession (collectively, the “Debtors”) and WPP LLC, by NRP (Operating) LLC, its sole member

(“NRP” and together with the Debtors, the “Parties”). The Parties hereby stipulate as follows:

WHEREAS, on October 14, 2018 (the “Petition Date”), certain of the Debtors filed

voluntary petitions for chapter 11 with the United States Bankruptcy Court for the Northern

District of Alabama (the “Court”).

WHEREAS, on October 15, 2018, the Debtors filed with the Court their Motion for Entry

of Interim and Final Orders (I) Authorizing Postpetition Secured Financing Pursuant to 11 U.S.C.

§§ 105(A), 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e), (II) Authorizing

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: Mission Coal Company, LLC (8465); Beard Pinnacle, LLC (0637); Oak Grove Land Company, LLC (6068); Oak Grove Resources, LLC (0300); Pinnacle Land Company, LLC (6070); Pinnacle Mining Company, LLC (7780); Seminole Alabama Mining Complex, LLC (6631); Seminole Coal Resources, LLC (1795); Seminole West Virginia Mining Complex, LLC (7858); Seneca Coal Resources, LLC (1816); and Seneca North American Coal, LLC (5102). The location of the Debtors’ service address is: 7 Sheridan Square, Suite 300, Kingsport, Tennessee 37660.

Case 18-04177-TOM11 Doc 273 Filed 11/15/18 Entered 11/15/18 15:35:02 Desc Main Document Page 1 of 153

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the Debtors’ Use of Cash Collateral Pursuant to 11 U.S.C § 363, (III) Granting Adequate

Protection Pursuant to 11 U.S.C. §361, 363 and 364, and (IV) Scheduling a Final Hearing

Pursuant to Bankruptcy Rules 4001(b) and 4001(c) [Docket No. 340] (the “DIP Motion”).

WHEREAS, On October 31, 2018, NRP filed with the Court its Objection to the Interim

Order and Motion for Entry of a Final Order (I) Authorizing Postpetition Secured Financing

Pursuant to 11 U.S.C. §§ 105(a), 361, 362, 363, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and

364(E), (II) Authorizing the Debtors’ Use of Cash Collateral Pursuant to 11 U.S.C. § 363, (III)

Granting Adequate Protection Pursuant to 11 U.S.C. §§ 361, 363 and 364, and (IV) Scheduling a

Final Hearing Pursuant to Bankruptcy Rules 4001(b) and 4001(c) [Docket No. 172] (the “DIP

Objection”).

WHEREAS, on November 8, 2018, the Debtors filed the Debtors’ Motion for Entry of an

Order Authorizing and Approving the Debtors’ Assumption of the Oak Grove Coal Mining Lease

[Docket No. 228] (the “Assumption Motion”) and Motion to Shorten Notice with Respect to

Debtors’ Motion for Entry of an Order Authorizing and Approving the Debtors’ Assumption of the

Oak Grove Coal Mining Lease [Docket No. 229].

WHEREAS, on November 9, 2018, the Parties jointly submitted the Stipulation

Concerning Schedule for Motion to Assume Oak Grove Coal Mining Lease and Schedule for

Objection of Natural Resources Partners, L.P. to the Interim Order and Motion for Entry of Final

Order Authorizing Postpetition Secured Financing [Docket No. 234].

WHEREAS, the Parties have met and conferred on how to coordinate and streamline

proceedings related to the Assumption Motion and DIP Objection.

WHEREAS, the Parties now desire to enter into this Stipulation of certain agreed facts


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and other matters to govern the November 19th hearing2 on the Assumption Motion, the DIP

Objection, and any replies filed in response thereto (the “Hearing”), as set forth herein.

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED AS

FOLLOWS:

A. On June 30, 2003, NRP and Oak Grove entered into a coal mining lease (a true and

correct copy of which is attached hereto as Exhibit A) (the “2003 Lease”).

B. On December 22, 2015, pursuant to a Unit Purchase Agreement of the same date,

“Cliffs Natural Resources Inc. and CLF PinnOak LLC (100% indirect owner of Oak Grove and an

indirect wholly owned subsidiary of Cliffs) as ‘Seller’ and Seneca Coal Resources, LLC, a

Delaware limited liability company, as ‘Purchaser,’ Seller sold and conveyed 100% ownership

interest in PinnOak Resources, LLC (the 100% owner of [Oak Grove]) to Purchaser (the

‘Transaction’).” See Amended and Restated Lease of December 22, 2015 (a true and correct copy

of which is attached hereto as Exhibit B) (the “2015 Lease”).

C. Also on December 22, 2015, NRP and Oak Grove entered into the 2015 Lease, with

an effective date retroactive to June 30, 2003. See Exhibit B.

D. Between January 26 and 31, 2018, NRP and Oak Grove, together with Pinnacle

Mining Company, LLC, a Delaware limited liability company (“Pinnacle”), and Mission Coal

Company, LLC, a Delaware limited liability company (“Mission”) entered into a series of

agreements (true and correct copies of the documents from the closing package are attached hereto

as Exhibit C) (the “January 2018 Agreement”).

E. On August 6, 2018, Pinnacle issued a WARN Act Notice (the “WARN Act

Notice”) notifying employees of a potential idling of the Pinnacle mine effective as of October 5,

2 November 19, 2018, at 10:00 a.m. prevailing central time, or as soon thereafter as the parties can be heard by this Court.


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2018 or within the following two weeks.

F. As of August 24, 2018, Oak Grove had not paid the June 2018 and July 2018

royalties due to NRP in the amount of $1,042,094.24 and $107,665.03, respectively, pursuant to

the terms of the 2015 Lease. NRP sent a letter dated August 24, 2018 (the “August 24 Letter”) to

Oak Grove, which stated, “The Lease provides that if the default is not cured within fifteen (15)

days of this notice, WPP LLC, at its option, may terminate the Lease without further notice . . . .”

A true and correct copy of the August 24 Letter is attached hereto as Exhibit D.

G. Oak Grove made the June 2018 and July 2018 royalty payments due under the 2015

Lease, and the June 2018 royalty payment due under a coal mining lease between Pinnacle and

NRP, by paying $682,000 on August 29, 2018, $341,0000 on September 14, 2018, and

$340,941.78 on September 21, 2018, totaling $1,363,941.78, and NRP confirmed receipt and cure

by letter on September 24, 2018. See Letter dated September 24, 2018 (a true and correct copy of

which is attached hereto as Exhibit E) (the “September 24 Cure Letter”).

H. As of September 20, 2018, Oak Grove had not paid the August royalties owed to

NRP, which were in the amount of $994,387.99, pursuant to the terms of the 2015 Lease. NRP

sent a letter dated September 20, 2018 (“September 20 Letter”) to Oak Grove, which stated, “The

Lease provides that if the default is not cured within fifteen (15) days of the date of this notice,

WPP LLC, at its option, may terminate the Lease without further notice . . . .” A true and correct

copy of the September 20 Letter is attached hereto as Exhibit F.

I. Oak Grove did not pay the amounts requested by NRP in the September 20 Letter.

J. On October 9, 2018, Mr. Thomas Lane, counsel for NRP, communicated by email

to Mission’s General Counsel, Vice President of Human Resources, and Secretary, Gary

Broadbent (the “October 9th Lane Email”). A true and correct copy of the October 9th Lane Email


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together with all attachments is attached hereto as Exhibit G.

K. There are four attachments to the October 9th Lane Email: (1) the January 2018

form of amended and restated lease, which Oak Grove and NRP never executed; (2) a draft

performance bond agreement; (3) a term sheet proposed by NRP; and (4) a copy of the January

2018 Agreement.

L. On October 9, 2018, Mr. Broadbent, sent an email to Tom Lane, Greg Wooten, and

Kathryn Wilson (“October 9th Email Reply”). A true and correct copy of the October 9th Email

Reply is attached hereto as Exhibit H.

M. On October 10, 2018, Mr. Broadbent, sent an email to Tom Lane, Greg Wooten,

and Kathryn Wilson (“October 10th Email”). A true and correct copy of the October 10th Email

together with all attachments is attached hereto as Exhibit I.

N. On November 8, 2018, the Debtors wired $1,459,598.66 to NRP for the August and

September unpaid royalties due under the 2015 Lease and on November 14, 2018 the Debtors

wired $1,331,176.27 to NRP for the October royalties due under the 2015 Lease (the “Royalties

Due Payments”), and NRP is holding the Royalties Due Payments. Oak Grove’s tender of the

Royalties Due Payments and NRP’s possession of the Royalties Due Payments does not waive or

adversely affect (i) NRP’s assertion that the 2015 Lease had been terminated prepetition; (ii) Oak

Grove’s right to dispute NRP’s assertion that the 2015 Lease had been terminated prepetition; or

(iii) Oak Grove’s right to assert that in the event the Court finds that the 2015 Lease had been

terminated prepetition, such 2015 Lease may be reinstated in part because the Debtors tendered

the Royalties Due Payments; provided, however, that the Royalties Due Payments shall be

immediately returned to the Debtors in the event that the Court denies the Assumption Motion.

O. The average price of coal per ton from the Oak Grove mine and from the Pinnacle


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mine was in excess of $100 during 2018.

P. A true and correct copy of the Declaration of Kevin Nystrom, Mission’s Chief

Restructuring Officer, in Support of the Assumption Motion (the “Nystrom Declaration”) is

attached hereto as Exhibit J.

The following stipulations pertain to the evidentiary effect of the attachments to this

Stipulation.

1. NRP will not object to the admission of the Nystrom Declaration on the condition

that Mr. Nystrom will be available for cross-examination at the Hearing; provided, however, that

Debtors reserve the right to supplement the Nystrom Declaration with live testimony from Mr.

Nystrom.

2. NRP and the Debtors stipulate and agree to the admission at the Hearing of any

documents attached to this Stipulation, the Motion to Assume or attached to the Nystrom

Declaration.3 No other documents will be introduced at the Hearing, provided, however, that the

Debtors and NRP reserve the right to introduce additional documents at the Hearing should the

Debtors or NRP raise new factual issues in any objection to the Assumption Motion or in response

to the DIP Objection, or in any other pleading filed before the November 19 hearing, and the

Parties shall endeavor to meet and confer on this issue prior to the commencement of depositions.

For the avoidance of doubt, (i) the January 2018 Agreement and the Financing Statement that are

attached to the Assumption Motion are not being admitted for the purpose of establishing that NRP

has a valid security interest in any assets described therein, (ii) by admitting these documents no

party is conceding that NRP has a valid security interest in any such assets, and (iii) the Parties

3 The Debtors will provide NRP’s counsel with a copy of the DIP Budget, and supplement the Nystrom Declaration with such DIP Budget prior to the Hearing. The DIP Budget will be the only exhibit to the Nystrom Declaration.


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have agreed pursuant to the terms of the final order approving the DIP Motion to defer resolution

of any issues relating to the validity and perfection of NRP’s alleged security interest to a later

time.

3. No witnesses, other than Mr. Nystrom, Mission’s Chief Restructuring Officer,

Michael Zervos, Mission’s Chief Executive Officer, and Greg Wooten, NRP’s Vice President &

Chief Engineer, will be called by the parties at the Hearing, provided, however, that the Debtors

and NRP reserve the right to call other witnesses should the Debtors or NRP raise new factual

issues, including with respect to the validity and perfection of the alleged security interests

mentioned herein, in any objection to the Assumption Motion or in response to the DIP Objection,

and the Parties reserve the right to call witnesses to respond to information requests and/or

inquiries from the Court.

4. Other than informal document discovery from Mr. Nystrom, and depositions of Mr.

Nystrom, Mr. Zervos, or Mr. Wooten, no depositions or document discovery will occur in advance

of the Hearing.

5. This Stipulation shall be immediately binding and effective on the Parties upon its

filing.

6. The Court retains exclusive jurisdiction to resolve any dispute arising from or

related to the interpretation or enforcement of this Stipulation.

7. This Stipulation may be executed in multiple counterparts, any of which may be

transmitted by facsimile or electronic mail, and each of which will be deemed an original, but all

of which together will constitute one instrument.


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Dated: November 15, 2018 /s/ Daniel D. Sparks Daniel D. Sparks Bill D. Bensinger CHRISTIAN & SMALL LLP 505 North 20th Street, Suite 1800 Birmingham, Alabama 35203 Telephone: (205) 795-6588 Facsimile: (205) 328-7234Email: [email protected]

[email protected]

- and –

James H.M. Sprayregen, P.C. Brad Weiland (pro hac vice) Melissa N. Koss (pro hac vice) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 300 North LaSalle Chicago, Illinois 60654 Telephone: (312) 862-2000 Facsimile: (312) 862-2200Email: [email protected]

[email protected] [email protected]

– and –

Stephen E. Hessler, P.C. (pro hac vice) Ciara Foster (pro hac vice) KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900Email: [email protected]

[email protected]

Proposed Co-Counsel to the Debtors


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/s/ Brian R. Walding Brian R. Walding WALDING, LLC 2227 First Avenue South, Suite 100 Birmingham, Alabama 35233 Telephone: (205) 307-5050 Email: [email protected] – and – Augustus C. Epps, Jr., Esquire (VSB No. 13254) Michael D. Mueller, Esquire (VSB No. 38216) Jennifer M. McLemore, Esquire (VSB No. 47164) CHRISTIAN & BARTON, LLP 909 East Main Street, Suite 1200 Richmond, Virginia 23219-3095 Telephone: (804) 697-4100 Facsimile: (804) 697-6122 Email: [email protected]

[email protected] [email protected]

Counsel for WPP LLC and NRP (Operating) LLC

CERTIFICATE OF SERVICE

I, Daniel D. Sparks, certify that on November 15, 2018, I caused a copy of the foregoing

document to be served via the Court’s Electronic Case Filing System on those entities and

individuals who are listed on the Court’s Electronic Mail Notice List.

/s/ Daniel D. Sparks Daniel D. Sparks


Exhibit A

2003 Lease


Exhibit B

2015 Lease


Exhibit C

January 2018 Agreement


Case 18-04177-TOM11 Doc 273-1 Filed 11/15/18 Entered 11/15/18 15:35:02 Desc Appendix Part 2 Page 1 of 156

Exhibit D

August 24 Letter


Exhibit E

September 24 Cure Letter


Exhibit F

September 20 Letter


Exhibit G

October 9th Email


Exhibit H

October 9th Email Reply


Exhibit I

October 10th Email


Exhibit J

Nystrom Declaration


UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

) In re: ) Chapter 11 ) MISSION COAL COMPANY, LLC, et al.,1 ) Case No. 18-04177-TOM11 ) Debtors. ) (Jointly Administered) )

DECLARATION OF KEVIN NYSTROM IN SUPPORT OF DEBTORS’ MOTION FOR ENTRY OF AN ORDER AUTHORIZING AND APPROVING

THE DEBTORS’ ASSUMPTION OF THE OAK GROVE COAL MINING LEASE

I, Kevin Nystrom, hereby declare under penalty of perjury as follows:

1. I am an authorized representative of Zolfo Cooper, LLC, a New Jersey limited

liability company, an affiliate of Zolfo Cooper Management, LLC (either “Zolfo Cooper”). I have

served in this capacity since September 2000, and, as of August 22, 2018, have served serve as

Chief Restructuring Officer to the Debtors. In my capacity as Chief Restructuring Officer, I am

generally familiar with the Debtors’ day-to-day operations, business and financial affairs, and

books and records. I am above 18 years of age, and I am competent to testify.

2. I submit this declaration (this “Declaration”) in support of the relief requested in

the Debtors’ Motion for Entry of an Order Authorizing and Approving the Debtors’ Assumption

of the Oak Grove Coal Mining Lease (the “Motion”),2 filed with this Court contemporaneously

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification

number, include: Mission Coal Company, LLC (8465); Beard Pinnacle, LLC (0637); Oak Grove Land Company, LLC (6068); Oak Grove Resources, LLC (0300); Pinnacle Land Company, LLC (6070); Pinnacle Mining Company, LLC (7780); Seminole Alabama Mining Complex, LLC (6631); Seminole Coal Resources, LLC (1795); Seminole West Virginia Mining Complex, LLC (7858); Seneca Coal Resources, LLC (1816); and Seneca North American Coal, LLC (5102). The location of the Debtors’ service address is: 7 Sheridan Square, Suite 300, Kingsport, Tennessee 37660.

2 Capitalized terms used but not defined herein have the meanings given to such terms in the Motion.


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herewith. Unless otherwise indicated, all facts set forth in this declaration are based upon (a) my

personal knowledge of the Debtors’ current operations and financial performance, (b) information

learned from my review of relevant documents, and (c) information I have received from members

of the Debtors’ management or advisors.

3. I am authorized to submit this Declaration on behalf of the Debtors, and, if I were

called upon to testify, I could and would testify competently to the facts set forth herein.

Qualifications

4. I am an authorized representative of Zolfo Cooper and serve as Chief Restructuring

Officer to the Debtors. I am a graduate of the University of South Dakota with a degree in business

administration. I have over 25 years of diversified business experience in restructuring, financial

management, and accounting. I have extensive experience in the development of reorganization

plans, creditor negotiations, business plan preparation and long-term forecasting, developing and

implementing cost reduction programs, and financial management of public and privately held

companies. I have advised companies, boards, investors, and lender groups and served in interim

management roles and led assignments in numerous industries. I served as the Chief Operating

Officer of Hawaiian Telcom, the Chief Restructuring Officer of Barnes Bay Development, the

Dolan Company, and American Home Mortgage, and the Chief Executive Officer of Boomerang

Tube LLC.

Assumption of the Oak Grove Coal Mining Lease is Critical to the Debtors’ Business

5. The Debtors entered into the Oak Grove Coal Mining Lease on June 30, 2003, and

amended on December 22, 2015, for a 20-year term. The Oak Grove Coal Mining Lease governs,

among other things, the Debtors’ ability to mine, process, and transport coal on certain leased

premises.


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6. The Debtors derive significant revenue as a result of the access and mining rights

provided for under the Oak Grove Coal Mining Lease. Indeed, coal mined pursuant to the Oak

Grove Coal Mining Lease has generated approximately $130 million in revenue between January

2018 and September 2018, which represents approximately 46% of the Debtors total coal revenue

during that period of time. Looking forward, the Oak Grove Coal Mining Lease will continue to

be an essential asset to the Debtors, and ultimately, any potential purchaser of the Debtors’ assets,

as it enables the Debtors to access reserves that are crucial to both short- and long-term production

at Oak Grove. In fact, the Oak Grove Coal Mining Lease covers over 95 percent of Oak Grove’s

planned coal production for the next three years and includes reserves that must be cleared to

access additional reserves that represent 100 percent of Oak Grove’s production beyond the next

three years.

7. I believe that the Debtors would suffer irreparable harm if the Debtors are unable

to assume the Oak Grove Mining Lease. Given the key role that the Oak Grove Coal Mining Lease

plays in the Debtors’ business, it is essential for the Debtors, who are currently running a value-

maximizing marketing process for their assets, to be able to represent to and assure any potential

bidder that the Oak Grove Coal Mining Lease is an integral part of the Debtors’ estate. Losing

that would hinder the Debtors’ efforts to attract potential bidders and maximize their estates’ value,

which is ultimately to the detriment of all of the Debtors’ stakeholders.

8. Lastly, the Debtors are required to either obtain an order of the Court granting the

Motion no later than November 20, 2018, or otherwise resolve issues with respect to the Oak Grove

Coal Mining Lease in a manner satisfactory to the DIP Lenders under the terms of the DIP Credit

Facility. This further supports assumption of the Oak Grove Coal Mining Lease as a sound


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exercise of the Debtors’ business judgment, as it is essential to the Debtors’ ability to operate their

business and maintain access to financing during the pendency of these chapter 11 cases.

The Debtors Have Tendered the Royalties Due Payment and Provided Adequate Assurance of Future Performance

9. In recognition of the fact that the Debtors’ operations pursuant to the Oak Grove

Coal Mining Lease are essential to preserving the value of their estates, the Debtors have already

paid the Lessor the Royalties Due Payment, and have ensured that they have sufficient liquidity to

continue their operations, and more specifically to perform under the Oak Grove Coal Mining

Lease, throughout these chapter 11 cases. Indeed, as reflected in the Debtors’ debtor-in-possession

financing facility’s budget, the Debtors’ debtor-in-possession financing facility was specifically

sized to allow the Debtors to continue their day-to-day operations and implement their business

plan, which includes full performance under the Oak Grove Coal Mining Lease.

10. Accordingly, based on the foregoing, I respectfully submit that the Court should

approve the Motion.

[Remainder of page intentionally left blank.]


Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing

statements are true and correct to the best of my knowledge, information, and belief.

Dated: November 15, 2018 Respectfully submitted, /s/ Kevin Nystrom Kevin Nystrom

Authorized Representative Zolfo Cooper, LLC


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