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Case 1:20-bk-12043 Doc 3 Filed 07/22/20 Entered 07/22/20 17:38:25 Desc Main <br /> Document Page 31 of 42 <br /> 74. The Surety Bonds were originally negotiated between the Issuer and non-debtor <br /> entity Royal Energy Resources, Inc. ("Royal"). Royal was able to secure excellent terms for the <br /> Surety Bonds, including that Debtors are required to maintain cash collateral of 7.5% of the total <br /> outstanding Surety Bonds, which is low for the coal industry. The Debtors pay Royal an annual <br /> fee for brokering the deal between Debtors and the issuer. <br /> 75. The Debtors have provided cash collateral in an amount of approximately <br /> $3,000,000.00 in support of their Surety Bonds. The Debtors are required to maintain cash <br /> collateral of 7.5% of the total outstanding Surety Bonds, with slight variation on the percentage <br /> from time to time. <br /> 76. The Debtors pay premiums for the Surety Bonds, which premiums generally are <br /> determined annually and are paid by the Debtors to the issuer of the Surety Bonds at issuance <br /> and annually thereafter. The Debtors pay approximately $800,000.00 in annual premiums on <br /> account of the Surety Bonds and the Debtors owe approximately $81,228.00 in outstanding <br /> premiums. <br /> 77. To secure their obligations under the Surety Bonds, the Debtors have entered into <br /> a number of such indemnity agreements (the "Indemnity Agreements"). Pursuant to the <br /> Indemnity Agreements, the Debtors have agreed to indemnify certain parties from any loss, cost, <br /> damage or expense they may incur by reason of their execution of any bonds. <br /> 78. It is essential to the Debtors' operations that they maintain their Surety Bond <br /> Program on an ongoing and uninterrupted basis. The non-payment of obligations under the <br /> Surety Bond Program could result in the issuer attempting to terminate, declining to renew or <br /> refusing to enter into Surety Bonds with the Debtors in the future. If any Surety Bonds lapse <br /> without renewal, or if the Debtors are unable to obtain new Surety Bonds for certain purposes, <br /> 31 <br />