Essar Global infuses $150 million into Trinity Coal

Mumbai: Essar Global Fund Ltd on Monday said it has infused more than $150 million through its affiliates to reorganize its bankrupt unit Trinity Coal Corp.

Trinity, which mines coal in Kentucky and West Virginia in the US, will continue operations after it emerges from bankruptcy. “Trinity successfully resolved more than $325 million of claims under its plan, which includes a capital infusion of more than $150 million by affiliates of Trinity’s ultimate parent company, Essar Global Fund,” Trinity said in a statement. Essar received 100% of the common equity of the reorganized company under the plan, and all secured, administrative and priority claims will be paid in full or voluntarily compromised, the statement said. “Holders of allowed general unsecured claims are expected to receive from $0.15 to $0.25 on the dollar pursuant to Trinity’s disclosure statement,” the statement said.

Essar Global did not disclose how it raised the $150 million.

Trinity’s lenders led by Credit Agricole SA, ING Capital Llc and Natixis had filed a Chapter 11 bankruptcy petition in Lexington, Kentucky against Trinity and its affiliate Frasure Creek Mining Llc after the company stopped paying back around $120 million to them. Under Chapter 11, a trustee is empowered to liquidate the debtors assets to help creditors recover all dues. Trinity was once a leading coal mining company but lost its sheen after power companies started migrating to cheaper and cleaner options such as natural and shale gas. Of Trinity’s total reserves, three-fourth is met coke and the rest thermal coal.

“Trinity’s recapitalization was facilitated by a dual-track global 363 sales process and standalone reorganization plan that ultimately resulted in maximizing the value to all Trinity stakeholders while enhancing the company’s liquidity and financial flexibility,” said Jared J. Dermont, a managing director at Moelis and Co. Essar Group, too, is sitting on debt pile of at least $12 billion.

Essar Group, the Indian business group controlled by billionaire brothers Shashikant and Ravikant Ruia, acquired Trinity Coal in 2010 for $600 million.

“Essar had prepared a restructuring plan by engaging Moelis and Co. as its restructuring agent and got its approval from the bankruptcy court in Kentucky Province under which the plan was to be put in place by 31 January 2014,” said a person close to the development.

Based on the plan, Trinity was reacquired with effect from 1 February 2014 by paying off the secured and unsecured creditors, equipment suppliers and others, freeing the company of all financial liabilities, he said.

“Trinity now will not only be the captive supplier of metallurgical coal to Essar’s steel plant at Algoma, Canada, it will also be one of the suppliers of metallurgical and steam coal in US domestic market,” he said. As per the restructuring plan rolled out now, Trinity will be a viable and profitable entity, with its assets put into optimum use, he added.