Wilbur L. Ross
Newcoal, LLC
c/o WL Ross & Co. LLC
101 East 52nd Street
19th Floor
New York, New York 10022
Dear Mr. Ross:
JANA Partners LLC is a holder of approximately $19 million in Second-Tier
Secured Term Notes due 2008 (the "Notes") issued by Horizon Natural Resources
Company ("Horizon"). Pursuant to Horizon's Amended Plan of Reorganization
(the "Plan") confirmed by the Bankruptcy Court, holders of the Notes shall be
issued stock in the newly-formed Newcoal LLC ("Newcoal") which purchased
certain of Horizon's assets.
Pursuant to the Plan, the so-called "Ad Hoc Committee" and your company,
WLR Coal Holdings LLC ("WLR Coal") were to receive a cash fee of $3.75 million
for arranging $125 million in junior debt for Newcoal.
We were disturbed to learn that in your letter of September 21, 2004, you
announced that you will be taking the $3.75 million cash fee in stock -- at
the offering price to Noteholders which is approximately 22% of the current
market price of approximately $16.75 million. Accordingly, the Ad Hoc
Committee and WLR Coal will be providing itself with an illegal windfall of
approximately $13 million at the expense of its fellow Noteholders in
violation of the Plan.
Your conduct is particularly egregious in light of the fact that all
subscriptions for the rights offerings were due on September 22 and Rescission
Notices are due by 5:00 p.m. today.
We do not intend to rescind our subscription. However, please be advised
that we reserve all rights to pursue any and all legal and other remedies
relating to this matter. Moreover, in light of the fact that the value of the
stock issued to WLR Coal and the Ad Hoc Committee is vastly below market, we
will seek disgorgement of any post-closing value from the appreciation of
these shares that rightly belongs to the entire body of Noteholders.
In that respect, we join with Third Point Management Company LLC in
indicating our dissatisfaction with your evident self-dealing and failure to
act in a fiduciary capacity with respect to your fellow Noteholders and future
shareholders. We urge all other Noteholders to join with us in doing so.
By:
Barry Rosenstein, Managing Partner
Marc Lehman, Partner
JANA Partners LLC