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i Page 3 Powderhorn also states that if it is unable to get Frontier to post a letter of credit drawn on a financially sound bank3 or if Powderhorn is unable to get a replacement bond from another surety, it will explore other means to resolve the NOV. What other means does Powderhorn have in mind? Identify the persons whom you or Powderhorn intends to contact, and state what you or Powderhorn intends to tell those persons. Every two weeks, starting on January 26, 2001, please identify whom you or Powderhorn has contacted in such an effort. III. Resolution of the issues raised in the NOV and our letters of January 5 and 10, 2001° may ultimately involve financial contributions from more than one source, including Powderhorn, Powderhorn's parent companies, Frontier, the Lender Group, a financially strong bank issuing a letter of credit, and one or more replacement sureties. We understood before we sent our January 5, 2001 letter that the Bankruptcy Court would probably need to approve any arrangement you made for a substitute surety and that *_he Lender Group would file a response to any such motion, unless they agreed with the arrangement.5 In particular, the Lender Croup can be expected to resist if the substitute surety requires collateral for a portion of its exposure and the substitute surety's security interest would prime the Lender Group's lien. 'You speak of a "Letter of Credit in favor of Powderhorn." The letter of credit should be in favor of DMG, not in favor of Powderhorn's bankruptcy estate. First, the Frontier Bond was posted prepetition in favor of DMG, not in favor of Powderhorn. Second, a letter of credit in favor of Powderhorn now, postpeti[ion, would be an asset of Powderhorn's bankruptcy estate and would, therefore, go primarily to creditors of Powderhorn other than DMG -- principally the Lender Group on either its secured claim or its unsecured deficiency -- and not to DMG. In contrast, a letter of credit in favor of DMG would not be an asset of Powderhorn's bankruptcy estate. See, 11 U.S.C. § 591(bl(1). Alternatively, DMG would have a secure[}' interest in a letter of credit in favor of Dh1G; after relief from stay under 11 U.S.C. § 362(d), Dh]G could foreclose on a letter of credit in favor of DMG. Finally, it is DMG and the taxpayers of Colorado who will be left with the reclamation cost i° the Frontier Bond is r.ot replaced with a financially strong substitute surety or alter^.ative form. of financial assurance in favor of DMG. °Our January 10 letter is not a response to your January 10 letter. SAlthough not mentioned in your January 10 letter, the unsecured creditors committee and possibly the United States Trustee may also file a response.