The owner of eastern Kentucky coal properties disputed the validity of American Resources Corp.'s bid for their leases in Cambrian Coal Corp.'s bankruptcy proceedings.
Hazard Coal Corporation, which owns the properties in Perry County, Ky., wrote in a Dec. 10 filing with the U.S. Bankruptcy Court for the Eastern District of Kentucky that its lease with Perry County Coal LLC, a subsidiary of Cambrian, expired four days before the debtors filed for bankruptcy protection. Hazard alleges that it terminated the lease after the debtor missed its annual minimum royalty payment, triggering an event of default.
A court approved Cambrian's plan to sell off its assets in September, which included transferring some of Cambrian's assets pertaining to three active mines and a preparation plant to American Resources.
Hazard argued that its lease with the debtors expired prepetition, meaning they cannot be transferred to American Resources, or ARC, and "the liabilities will remain those of the Debtors' bankruptcy estates to the detriment of the creditors of the estate, including Hazard Coal."
The debtors and American Resources have objected, saying certain provisions in the bid procedures and sale order, such as objection deadlines, bar Hazard from raising the issue.
Hazard is seeking an opportunity to prove that the lease expired prepetition, which it claims the debtors and American Resources understood. It also wants to prove that American Resources "lacked good faith in purchasing the Perry County Assets, that the very nature of the Bid Procedures Order and Sale Order created an impossibility of ARC's performance thereunder, and to correct manifest injustice by ARC's inability to adhere to requirements under the Lease," according to court documents.
In a separate filing submitted Dec. 6, the Kentucky Employers' Mutual Insurance Company asked the court to sanction American Resources and its subsidiary, claiming those entities had not made a more than $90,000 payment that was due Dec. 2 or suggested an alternative payment schedule. The insurance company has filed three motions attempting to receive its court-determined payment under the sale order.
The companies' "flagrant disregard of the terms of this Court's order necessitate this Court's exercise of authority to determine and impose a proper sanction," the document states.
American Resources received a letter from the Nasdaq Stock Market in October regarding its noncompliance with the exchange's listing rule. The company has until April 6, 2020, to increase and maintain its share price to at least $1 per share for 10 consecutive business days or more.