1993-10-05_GENERAL DOCUMENTS - C1981017 ‎(3)‎

• Permit No: C1981017
• IBM Index Class Name: GENERAL DOCUMENTS
• Doc Date: 10/5/1993
• Doc Name: Debtor's disclosure statement
• From: US District Court
• To: Mid-Continent Resources, Inc.
• Permit Index Doc Type: General Correspondence
• Media Type: D
• Archive: No

the mothball program through the Fall, but thereafter was unable
and unwilling to continue financing the mothball program since it
was clear that Minerals would realize nothing from a sale of the
Mine.
The Debtor filed a voluntary Chapter 11 petition in
bankruptcy in the United States Bankruptcy Court for the District
of Colorado on February 12 , 1993. Bankruptcy reduced the Debtor's
monthly expenses by suspending catch-up payments to the federal
government on a federal mineral lease, catch-up payments to Public
Service Company on a pre-petition power contract, and payments on
equipment leases and equipment installment purchase contracts.
Additionally, the Debtor believed that bankruptcy would expand the
possibilities for bridge financing of the mothball program pending
sale. Further, the Debtor concluded that if a sale agreement was
not reached, it would be necessary to terminate the mothball
program and commence a program to salvage mine equipment, reclaim
the mine site, and sell the real property for non-mining uses. The
Debtor believed that Chapter 11 presented the best vehicle for
addressing these concerns.
II. DEVELOPMENTS IN CHAPTER 11 CASE
A. Negotiations for Sale of Mine as Operating Facility
As noted in Section I.B. , "The Mining Operation, " on page
above, the Debtor's primary customer in the late 1980 's was
Geneva Steel Corporation ( "Geneva" ) . The Debtor's suspension of
mining operations in January 1991, forced Geneva, located in Utah,
to obtain substitute coal from eastern suppliers. This resulted in
higher costs to Geneva due to higher freight charges.
Geneva was one of the potential purchasers initially
contacted by the Debtor in March 1991, but it did not respond at
that time. Geneva indicated that it was reluctant to become
involved because it considered itself to be a steel producer and
not a coal mine operator. At the same time, Geneva had an obvious
desire that the mine be reopened.
At the end of 1991, after negotiations with A.T. Massey
collapsed and it appeared that the Mine would not be sold to
another coal company, Geneva initiated negotiations to acquire the
Mine. Intensive negotiations resulted in an agreement in principle
to lease and sell the Mine to a newly-created Geneva subsidiary,
Crystal Springs Coal Company. The Debtor and Geneva agreed to a
Terms Sheet (the "Terms Sheet" ) on March 17, 1992.
Pursuant to the Terms Sheet, Crystal Springs funded 75%
of the expenses of mothballing the Mine pending sale of the Mine or
termination of negotiations. These expenses were estimated at
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