The American Coal Company $113 Million Debt Prepayment

Today, The American Coal Company paid Enron $113.5 million in principal and interest, which included a prepayment of the remaining $110.7 million balance on its debt with Enron ($75.7 million Senior Note, $35.0 million Subordinated Note). These two notes, with maturities of July 2004 and July 2008 respectively, were established in July 1998 to provide financing for the acquisition of the Galatia Mine by Bob Murray.

Despite the termination of the credit relationship, the physical relationship remains in place through December 2006 with projected deliveries of 1,900,000 tons of Galatia coal and 1,200,000 tons of Maple Creek Coal. The value in the remaining coal, supported by puts and fixed price arrangements, is in excess of $25 million. Beyond the value in the transaction, this deal, along with the DPR transaction with Cline in 1998, provided the foundation for Enron's coal business.

With this prepayment, Enron has now received over $250 million from its coal investments. The breakdown of the funding and cash flow is shown below:

Approved Commitments $275 million
Funded Commitments $271 million
Enron Funding (Net of Calpers) $240 million

Enron Cash Flows
Principal $188 million
Interest $ 44 million
Equity Distributions $ 8 million
Marketing Fees $ 7 million
Margin on Physical Coal $ 3 million
Total $ 250 million

In addition to the cash flow received to date, the investments are projected to provide minimum future cash flows as follows:

Principal and interest $ 20 million Loans secured by assets
Marketing fees $ 39 million Minimum marketing fees
Coal commodity margin $ 25 million Value of American Coal physical transaction
Equity distributions ??? 42% interest in Dakota & Remington
20% interest in BMR

Total $ 84 million + equity distributions