Davis Polk advised an ad hoc group of secured noteholders and the DIP facility agent in connection with the sale by Cloud Peak Energy Inc. of substantially all of its operating assets to Navajo Transitional Energy Company pursuant to section 363 of the U.S. Bankruptcy Code. The purchased assets were acquired in exchange for $15.7 million of cash, a $40 million unsecured promissory note, a five-year term production royalty interest and the assumption of certain tax liabilities and coal royalty payments in the amount of approximately $87.5 million, all environmental reclamation obligations, $20 million in post-petition accounts payable and cash to fund approximately $1 million in cure costs. On the closing date, Cloud Peak repaid its debtor-in-possession credit facility composed of a $35 million new money tranche and a $28 million roll-up tranche that had been backstopped by members of the ad hoc group.

The closing of the sale marks the conclusion of a U.S. Bankruptcy Court-approved sale process that commenced in June 2019, and paves the way for Cloud Peak to seek confirmation of a chapter 11 plan and distribute the sale consideration and additional cash on hand to the prepetition secured noteholders. A confirmation hearing is scheduled for December 5, 2019.

Headquartered in Gillette, Wyoming, Cloud Peak Energy mines low sulfur, subbituminous coal, and provides logistics supply services as a sustainable fuel supplier for approximately two percent of the nation’s electricity.

NTEC is a wholly owned limited liability company of the Navajo Nation operating in the coal and sustainable energy industry with operations in Farmington, New Mexico and on the Navajo Nation reservation.

The Davis Polk restructuring team includes partner Damian S. Schaible, counsel Christian Fischer and associates Aryeh Ethan Falk, Samuel A. Wagreich and Jarret Erickson. The corporate team includes partner William L. Taylor and associate Camila Panama. The finance team includes partner Monica Holland and associate Sarah S. Hylton. The tax team includes partner Lucy W. Farr and counsel Leslie J. Altus. Partner Nicholas A. Kronfeld provided capital markets advice. All members of the Davis Polk team are based in the New York office.

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