National Coal Corp. (Nasdaq: NCOC), a Central and Southern Appalachian
coal producer, announces its wholly-owned subsidiary, National Coal of
Alabama, Inc. has defaulted on its $60 million credit agreement entered
into October 2007 with TCW Asset Management Company and various lenders.
The lenders are expected to foreclose on the outstanding capital stock
of National Coal of Alabama.
No creditor of National Coal of Alabama, including the lenders under the
$60 million credit agreement, has a lien or encumbrance on assets of
National Coal Corp. or its other subsidiaries.
“We expect that the operations of National Coal Corp. and our other
subsidiaries, which operate coal mines and other facilities in
Tennessee, will continue independent of any actions that the lenders may
take with respect to National Coal of Alabama and its assets,” explains
Daniel A. Roling, President and CEO of National Coal Corp. “We have made
every effort available to us to service this obligation, while being
mindful of the continued protection of National Coal Corp.’s shareholder
value.”
As of June 30, 2009, National Coal of Alabama accounted for
approximately 55% of National Coal Corp.’s debt and liabilities,
approximately 39% of its consolidated revenues for the six months then
ended, and about 16% of its December 2008 total reserves. The Company
acquired National Coal of Alabama in October 2007, using a combination
of debt and equity to finance the acquisition and fund the subsidiary’s
operations.
Roling explains National Coal of Alabama’s ability to meet the terms of
the credit agreement was prevented by significant decreases in sales
volumes. “Some of our customers reduced or deferred their purchase
commitments by up to 25 percent, due in large part to varying demands
for their products. In addition, other anticipated sales did not
materialize. Due to this rapid deterioration of business in our southern
customer base, we were operating at volumes significantly lower than at
the level required to service the debt.”
He goes on to say how pronounced the changes were over the last few
months in Alabama. “The economy in Alabama has deteriorated rapidly, as
indicated by today’s announcement that its unemployment rate reached
10.1% in June. As recently as December, it was only 6.5%, below the
national average of 7.2% at that time. This is something we were unable
to forecast, as well as what extent it would have a negative impact on
the demand for electricity and other industrial goods,” says Roling. “We
have not experienced the same decline in demand at our Tennessee
operations that we have experienced in Alabama.
