Toronto Stock Exchange: XRG
KNOXVILLE, TN, Feb. 4, 2013 /CNW/ - Xinergy Ltd. (TSX:XRG) (the "Company" or "Xinergy"), a Central Appalachian coal producer, today announced that it has
completed the sale of its Straight Creek and Red Bird thermal coal
mining operations (the "Sale") in Bell, Clay, Harlan, Knox and Leslie Counties, Kentucky to
affiliates of JW Resources, Inc. (the "Buyer") for US$47.2 million in cash, subject to adjustment as provided for in
a definitive asset purchase agreement (the "Agreement") executed Friday, February 1, 2013.
Matt Goldfarb, Chief Executive Officer of Xinergy, commented: "This
divestiture furthers our efforts to position Xinergy's asset portfolio
towards a greater mix of premium quality, mid-vol metallurgical coal
production. Although we continue to view favorably the long-term
prospects for low-cost Central Appalachian thermal coal mining, we
believe that this transaction is both accretive to our shareholders and
value enhancing, from the perspective of enhanced liquidity and
operational flexibility, as we position our remaining assets for
The Sale is considered a "related party transaction" for the purposes of
Multilateral Instrument 61-101 ("MI 61-101") as Jon Nix, a greater than 10% shareholder of the Company, will have
an approximate 5.1% direct and/or indirect ownership interest in the
Buyer at the time of the Sale. However, the Sale is not subject to the
minority approval and valuation requirements under MI 61-101 as there
is an applicable exemption from these requirements as neither the fair
market value of the subject matter, nor the fair market value of the
consideration, for the Sale, insofar as it involves the interested
parties, exceeds 25% of Xinergy's market capitalization. Mr. Nix is
not a member of, nor does he have representation on, the board of
directors of Xinergy. The Buyer's other shareholders are not related
parties to the Company.
The Company's board of directors unanimously determined that the Sale is
in the best interests of the Company's shareholders. The Sale provides
the Company with, among others, the following benefits:
Deleveraging: The Company's net debt (total debt less cash) is reduced by
approximately 22% from approximately $216.7 million at December 31, 2012 to $169.5 million
after receipt of the net proceeds from the Sale and the repayment of
Liquidity: Net proceeds from the Sale are approximately $42.7 million, which is net of a $3 million escrow covering indemnity claims
under the Agreement and the repayment of approximately $4.4 million in
equipment debt. Approximately $38.2 million of such net proceeds,
after giving effect to equipment debt extinguishment,
transaction-related expenses and taxes, are anticipated to be deposited
into a Collateral Proceeds Account pursuant to the requirements of the
Indenture (the "Indenture") governing the Company's 9¼% Senior Secured
Notes. Based on the Company's cash balance of $32.2 million at
December 31, 2012, after giving effect to the Sale the Company's
liquidity profile is as follows:
Term Loan B Commitment
* Includes approximately $38.2 million of net proceeds from the Sale.
The Company anticipates paying the entire $20 million in estimated
infrastructure costs at its South Fork complex from the net proceeds
from the Sale held as restricted cash.
Reduced Dependence on Thermal Coal Production: The Sale substantially decreases the Company's dependence on CAPP
thermal coal production, and positions the Company to benefit from a
greater mix of premium quality, mid-vol metallurgical coal production.
The board of directors of the Company has received a fairness opinion
from GMP Securities L.P. (the "Fairness Opinion"), which concluded,
subject to the assumptions, limitations and qualifications described
therein, that the consideration to be received by the Company pursuant
to the Sale is fair, from a financial point of view, to the Company.
The Fairness Opinion will be filed on SEDAR at www.sedar.com together with the material change report related to this press release.
About Xinergy Ltd.
Headquartered in Knoxville, Tennessee, Xinergy Ltd., through its wholly
owned subsidiary Xinergy Corp. and its subsidiaries, is engaged in coal
mining in West Virginia and Virginia. Xinergy sells high quality
thermal and metallurgical coal to electric utilities, steelmakers,
energy trading firms and industrial companies. For more information,
please visit www.xinergycorp.com.
This press release contains forward-looking statements and information
that are based on the beliefs of management and reflect Xinergy's
current expectations. When used in this press release, the words
"estimate", "project", "belief", "anticipate", "intend", "expect",
"plan", "predict", "may" or "should" and the negative of these words or
such variations thereon or comparable terminology are intended to
identify forward-looking statements and information. The
forward-looking statements and information in this press release
include information relating to the effects of the Sale on Xinergy's
liquidity, Xinergy's intended use of the net proceeds from the Sale,
and selected fourth quarter 2012 operating date. Such statements and
information reflect the current view of the Company with respect to
risks and uncertainties that may cause actual results to differ
materially from those contemplated in those forward-looking statements
By their nature, forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual
results, performance or achievements, or other future events, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Such factors include, among others, completion of Xinergy's financial
statements for fiscal year 2012, which may reflect audit-related
adjustments to the fourth quarter selected financial data presented in
this release, and developments in Xinergy's business which may impact
the company's intended use of the net proceeds from the Sale.
The Company cautions that the foregoing list of material factors is not
exhaustive. When relying on Xinergy's forward-looking statements and
information to make decisions, investors and others should carefully
consider the foregoing factors and other uncertainties and potential
events. Xinergy has assumed a certain progression, which may not be
realized. It has also assumed that the material factors referred to in
the previous paragraph will not cause such forward-looking statements
and information to differ materially from actual results or events.
However, the list of factors is not exhaustive and is subject to change
and there can be no assurance that such assumptions will reflect the
actual outcome of such items or factors. Please refer to the risks
outlined in Xinergy's public disclosure record available on SEDAR at www.sedar.com for more details.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE
REPRESENTS THE EXPECTATIONS OF XINERGY AS OF THE DATE OF THIS PRESS
RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS
SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND
SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE
XINERGY MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION
AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE
SOURCE: Xinergy Ltd.
For further information:
Chief Executive Officer
Michael R. Castle
Chief Financial Officer