Horizon Natural Resources Co.’s $465 million term loan is continuing to draw bidders as coal prices reach new highs. A trader said a piece of the debt traded above 65 this week and approximately $25 million has changed hands in the past week. “Coal stocks are trading at all time highs,” a dealer said. Coal prices are approaching $60 a ton from $30 one year ago. The Dow Jones U.S. Coal Index is up 30.5%. The name has recently been quoted in the 65-70 context but rose from the 54-56 level after W.L. Ross & Co. teamed up with Contrarian Capital Management, Greenlight Capital, Stark Investments and Varde Partners to purchase the company (LMW, 6/18). Under the Ross plan, a rights offering will be made to noteholders to raise proceeds to fund the asset purchase. The rights offering will require a $125 million equity contribution from the noteholders and Ross. After the rights offering Ross and the loan holders will own more than 50% of Horizon's equity.
Two years ago Horizon, then known as AEI Resources, filed for bankruptcy twice in the same year (11/24). When Horizon first emerged from bankruptcy in May 2002 the company distributed $465 million of secured term notes and $450 million of 11.75% notes in exchange for $875 million of pre-petition bank debt with UBS. After the company filed for bankruptcy for the second time more than 50% of the $465 notes were acquired by the four distressed funds above.