Update from James River Coal: Asset Sale Complete, Disclosing Compensation Scheme for Chief Restructuring Officer $JRCC

The Form 8-K released today:

"On August 29, 2014, the Sellers completed the sale of their Hazard (excluding Laurel Mountain), West Virginia and Indiana assets (the “Assets”) to Blackhawk pursuant to the Amended Agreement. The consideration for the Assets was $52.0 million, consisting of (i) $20.0 million in cash paid to the Sellers, (ii) a third lien secured promissory note in the amount of $27.0 million delivered to the Sellers, and (iii) a second lien secured promissory note in the amount of $5.0 million delivered to one of the Sellers’ lessors, in lieu of a cash payment of cure costs under certain leases to be assumed by the Sellers and assigned to Blackhawk in connection with the sale."

Also important:

"Mr. Murphy will serve as CRO until the earlier of the tenth business day following the confirmation of a chapter 11 plan or, the first business day following written notice of termination of the Consulting Agreement. Pursuant to the Consulting Agreement, the Company will pay to Byron Advisors a monthly fee of $60,000.00 for Mr. Murphy’s services through January 31, 2015. Thereafter, the monthly fee will be reduced to $30,000 for each month in which Mr. Murphy provides his services to the Company. The Company has also agreed to reimburse Mr. Murphy for all reasonable and necessary out-of-pocket expenses incurred by Mr. Murphy in performance of the services. In addition, Mr. Murphy shall earn transaction fees equal to (a) $150,0000 upon the repayment in full in cash of the Company’s postpetition financing facility (which fee shall be reduced by $50,000 per month for each month after November 30, 2014), and (b) 5% of average recoveries of general unsecured creditors (prior to dilution for this fee), subject to a minimum of $250,000 (provided that general unsecured creditors receive at least $250,000, in the aggregate) and a maximum of $750,000, payable upon the effectiveness of a chapter 11 plan."

That's really interesting for several reasons. The CRO gets paid more if he gets the DIP paid off sooner, and his compensation rate declines if he's still working (doesn't have a plan confirmed) by January 2015. He will want to try to wrap this up quickly, but also these deadlines would also have been chosen because they seemed achievable.

It's also interesting that he gets a bonus if unsecured creditors recover anything. Since the 2015 bonds last traded at 1 cent, this is obviously an open question. I would think he'll angle for them to get a "tip" so that he can make his $250k.