Wilbur Ross Actions As Head of Horizon Natural Resources Creditor Committee Unfair According to Third Point Management Company
NEW YORK, Sept. 23 /PRNewswire/ -- Third Point Management Company LLC has sent the following letter to Wilbur L. Ross in his capacity as head of the ad hoc creditors committee for Horizon Natural Resources. Third Point is one of the largest creditors of Horizon, and objects to Ross and the other members of the ad hoc committee choosing to receive a $3.75 million fee in significantly undervalued equity, rather than in cash, which is called for in the plan of reorganization. By receiving this fee in equity, Third Point and other creditors are unfairly diluted. Daniel S. Loeb, Managing Member of Third Point commented: "If Horizon can't pay Wilbur's fee in cash per the agreement, then those shares should be offered for sale to all creditors to raise the cash for the fee. That's the fair thing to do, and Third Point is willing to buy any shares that other creditors don't want to make sure Wilbur gets paid. We have to protect our investors, and will consider legal action if Wilbur won't do the right and honorable thing." The letter reads: VIA US MAIL AND FACSIMILE September 23, 2004 Wilbur L. Ross NewCoal, LLC c/o WL Ross & Co. LLC 101 East 52nd Street 19th Floor New York, NY 10022 Dear Wilbur: Third Point Management Company L.L.C ("Third Point") is a holder of approximately $37 million of Second Lien Notes (the "Notes") issued by Horizon Natural Resources Company ("Horizon" or the "Company"), making us one of the Company's largest creditors. We estimate that we will own approximately 6.5% of the Company following its anticipated emergence from bankruptcy. We were aware that the ad hoc creditors committee (the "Ross-led Committee") was to receive a cash fee of $3.75 million as provided in the Third Amended Disclosure Statement dated July 11, 2004 and Amended Plan of Reorganization (the "Disclosure Statement" and "Plan", respectively). The reason we are writing you, in your capacity as head of the restructuring process, is your bald attempt to obtain a windfall by, in our view, "double-dipping" and taking payment of this fee in significantly undervalued equity (the "Windfall") rather than cash, as proposed in the Disclosure Statement. We received notification of the Windfall in a letter to creditors that you sent "at the 11th hour," the day after we wired funds to help finance the Company's emergence from bankruptcy. The resulting dilution of 2.48 million shares is unfair to other second-lien note holders and is inconsistent with terms set forth in the Disclosure Statement. We regret having to contact you in this manner, but we attempted in vain to reach you yesterday, having left two telephone messages; your failure to speak to us has left us with no other choice. We were eventually forwarded to your partner, Wendy Teramoto, to express our confusion and dismay over your apparent self-dealing in connection with the Windfall. Wendy (who promised to call back and still has not) stated that it was UBS Securities ("UBS') that demanded that this fee be paid in equity rather than cash. Given that UBS was originally comfortable with $150 million of term debt and the adjusted credit facility will provide for $145 million in acquisition debt, $3.75 million does not seem like an excessive financial burden for the Company. Furthermore, if the fee was a stumbling block to obtaining financing we believe a more honorable course would have been to simply waive the fee and thus complete the financing and restructuring process. Your timing of this notification on September 21, 2004 is, to put it charitably, unfortunate considering that all subscriptions for the rights offerings were due on September 22, 2004. We believe that all creditors should have the opportunity to purchase these shares and fund the cash payment to the Ross- led Committee. Third Point is willing to guarantee that all 2.48 million shares are purchased so that your fee can be paid in cash. In conclusion, we will not rescind our subscription, but be advised that we are reserving our rights to pursue any and all legal and other remedies relating to this matter. Given that the value of stock being issued is below market, we will seek to disgorge any value post-closing from the appreciation of these shares that rightly belongs to the entire creditors group. Wilbur, we mean you no disrespect by sending you this letter; it simply appears to us that the many years you spent generating fees as a financial advisor makes it irresistible for you to try to extract fees in your relatively new capacity as a principal. We urge you to avoid the temptation to use your position as the head of the restructuring process or in the future as Chairman of the Company, to extract special, unwarranted consideration not provided to those with whom you have a fiduciary relationship. I know that other large creditors, with whom we have spoken, such as JANA Partners (holder of $20 million face amount of the Notes), share our concern about the Windfall and your conduct. We urge other creditors who share these views to contact you. Sincerely, Daniel S. Loeb Managing Member About Third Point Management Company LLC Third Point Management advises a number of funds that target value- oriented, special situation and catalyst-driven investments. The firm manages approximately $1.4 billion in assets, was founded in 1995 by Daniel Loeb, and is based in New York. Media contact: Edward Rowley / Kathleen Merrigan The Abernathy MacGregor Group, Inc. (212) 371-5999
SOURCE Third Point Management Company LLC
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