Additional Detail for Stockholders of ANR, Inc. Regarding ... Detail Regarding ANR -...

Additional Detail for Stockholders of ANR, Inc. Regarding Capitalization Structure, Distribution Rights, Contingent Revenue Payment Obligations, and U.S. Real Property

Holding Corporation Status

March 2017

Disclaimer

● ANR, Inc. (“ANR” or the “Company”) is providing the following presentation for information purposes only

● This is not legal advice, but is intended to assist owners of ANR in understanding the complex capitalization structure, including its relationship to Alpha Natural Resources Holdings, Inc., and related restrictions on ANR as a result of the corporate structure and settlement agreements approved during the bankruptcy case. See the bankruptcy site (http://www.kccllc.net/alpharestructuring) for more information regarding the Plan of Reorganization and other documents from the bankruptcy case

● The following is a summary of key documents and provisions regarding the company. This is a summary only and in the event of any conflict between this presentation and the documents referenced herein, then the original document will control

● Please reference the original documents for a full explanation of any point or discussion and in the event of questions, we recommend you contact your legal counsel for specific guidance

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http://www.kccllc.net/alpharestructuring


Acronyms and Abbreviations

The Certificate of Designations for the Preferred Stock of Alpha Natural Resources Holdings or the Certificate of Designations for the Preferred Stock of ANR, as amended COD

The Certificate of Incorporation for ANR or Alpha Natural Resources Holdings, as appropriate

COI

Reclamation Funding Agreement RFA

The Second Amended Plan of Reorganization confirmed in the bankruptcy case

POR

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The Global Settlement among the First Lien Lenders, Second Lien Lenders, the Unsecured

Creditors Committee, and Alpha Natural Resources, Inc. in the bankruptcy case – Docket No.

2497

GS

Global Reclamation Agreement GRA

Corporate and Equity Structure Overview

• The corporate structure of Alpha Natural Resources Holdings, Inc. (“Holdings”) and ANR was established in the Second Amended Plan of Reorganization which was approved in the Chapter 11 Reorganization of Alpha Natural Resources, Inc. (“Old Alpha”)

• Holdings is a holding company with its only asset being the stock of C-2 Common Equity of ANR, Inc. that it holds

• ANR is the operating company • Direct and indirect parent of subsidiaries that mine coal, have reclamation obligations

and have other legacy liabilities

• Signatory to credit agreements

• Contingent Revenue Payment Rights are calculated from ANR’s gross revenue and paid by ANR

• The allocation of stock and the distribution rights under each of the stock classes were negotiated and agreed to among various creditor classes in Old Alpha’s Chapter 11 Reorganization

• See GS for further information

• Common stock in both Holdings and ANR are being issued as claims are allowed in the Bankruptcy Court as the percentage of stock issued to each creditor is dependent on the total amount of claims allowed in the Category 2 General Unsecured Claims pool

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Stock Classes Issued under the Plan of Reorganization

• Holdings Capitalization Structure

• Series A Preferred Stock has been issued to Old Alpha’s former First Lien Lenders (6.5 million shares)

• Series B Preferred Stock has been issued to Old Alpha’s Massey Noteholders (0.3 million shares)

• Common Stock is being issued to Category 2 General Unsecured Claimants (7 million shares)

• ANR Capitalization Structure

• Series A Preferred Stock has been issued to Old Alpha’s First Lien Lenders (6.5 million shares)

• Series B Preferred Stock has been issued to Old Alpha’s Massey Noteholders (0.3 million shares)

• Series C-1 Common Stock is being issued to Category 2 General Unsecured Claimants (7 million shares)

• Series C-2 Common Stock has been issued to Holdings (3 million shares)

• See Section 4.01 of the COIs and Paragraph (a) of the CDs of both Holdings and ANR for additional information regarding stock classes

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Category 2 General Unsecured Claims Pool

● There are four main categories of claimants in the Category 2 General Unsecured Claims pool

Old Alpha’s Unsecured Noteholders (Claims have all been allowed)

– 2017 Unsecured Notes





Old Alpha’s Second Lien Lenders Deficiency Claim (Claim has been allowed)

UMWA 1974 Pension Fund Claim (Claim has not yet been allowed)

U.S. Department of Labor Black Lung Benefits Claim (Settlement allowing claim filed in March 2017)

● These categories of claimants, with the exception of the Second Lien Lenders, will also receive the rights associated with the Contingent Revenue Payment (“CRP”) obligations

● See POR Article I.A.41 and 42. and Article II.B for additional information regarding treatment of general unsecured claims

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Contingent Revenue Payment Obligations

● The settlement between Old Alpha’s creditors also created a Contingent Revenue Payment obligation that will be paid by ANR

The CRP runs on gross revenues of ANR from 2018 through 2023

The CRP obligation begins in January 2018 (18 months from the Effective Date)

1.5% of the first $500 million of revenue and 1.0% on gross revenue greater than $500 million

ANR will contribute the required amounts on a quarterly basis into an escrow account and the distributions will be made annually in the second quarter of each year with the first distribution made in 2019

See GS p.6 and POR Article I.A.209 for additional information

● Category 2 General Unsecured Claimants, excluding the Second Lien Lenders, will receive CRP Rights that entitle the holder to a pro rata portion of the annual CRP

Distribution to holders of the rights associated with the CRP targeted for summer 2017 after resolution of outstanding UMWA 1974 Pension Fund Claim and U.S. Department of Labor Claim

Approximately 3.5-4.0 billion rights are expected to be issued

See POR Article II.B.7 for additional information

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Global Reclamation Agreements

● The Global Reclamation Agreements provide the framework whereby ANR will complete its required reclamation and water treatment obligations

● The GRA is actually a series of eight agreements:

Individual Permitting and Reclamation Plan Settlement Agreements with: – Illinois

– Kentucky

– Virginia

– West Virginia

Settlement Agreement with the Department of the Interior (“DOI”)

Stipulation Regarding Water Treatment Obligations with USEPA

Permitting and Mitigation Plan Funding and Settlement Agreement with the Army Corps of Engineers

Reclamation Funding Agreement with Illinois, Kentucky, Virginia, West Virginia and DOI

● The purpose of the GRA is to bring ANR into compliance with its various bonding and reclamation requirements over the course of the agreements

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Global Reclamation Agreements – Key Provisions

● Funding Obligations

Total Contributions to Reclamation Accounts of $109 million through 2025:

– $5.0 million in 2016

– $10.0 million in both 2017 and 2018

– $12.0 million annually from 2019-2025

Total Contributions to Water Treatment Accounts of $15 million through 2023



– $2.5 million annually from 2019-2023

Total Contributions to Mitigation Accounts of $18 million through 2022





– $3.0 million in 2020 and 2021


● See RFA paragraphs 4 (a) and 6(c) and US Army Corps of Engineers Settlement paragraph 3(d)

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● In addition to the mandatory funding obligations, there are also contingent funding obligations

25-50% of cash proceeds from asset sales exceeding $100,000 are contributed to the Reclamation Accounts – See, for example, WV GRA paragraph 4(b)(ii) for additional information

50% of Free Cash Flow is contributed to the Reclamation Accounts – Free Cash Flow contributions cease when the agreements have been fulfilled or the

Reclamation Accounts have been funded to 125% of the amount each state determines is necessary to complete reclamation in that state

All collateral returned as a result of a release of a surety bond is contributed to the Reclamation Accounts or, in the case of West Virginia, used to replace self-bonds that remain in place see – See RFA paragraph 4(b) and (c) for additional information regarding the excess free

cash flow contribution and surety collateral return

● Certain sites in West Virginia remain self-bonded and are covered by $39 million in restricted cash and a letter of credit plus an $6.3 million mortgage that functions as a pool bond

ANR must reclaim these properties, get the self-bonds released in accordance with applicable regulations or submit replacement surety bonds, cash or LCs such that all self-bonds are retired by 2026

See WV GRA paragraph 3(d) for addition information

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● Self-Bond Reduction Milestones

25% reduction from the aggregate amount of Self-Bonds in place on July 26, 2016 (~$152 million) by 2020

50% reduction from the aggregate amount of Self-Bonds in place on July 26, 2016 by 2023

100% reduction from the aggregate amount of Self-Bonds in place on July 26, 2016 by 2026

Reductions will come through the completion of reclamation leading to the release or reduction of required bonds, divesting certain non-strategic properties with self-bonds, and replacing self-bonds with other forms of financial assurance

● See WV GRA paragraph 3(d) for additional information

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● Limitations on Certain Transactions

ANR may enter into a merger, sale of substantially all of its assets or a change in control, as defined in the WV GRA, but in each case only if:

– ANR has complied with its obligations under the RFA to fund or assure funding and

– The West Virginia Department of Environmental Protection determines, “in its sole and absolute discretion” that ANR, a purchaser or other successor will have the ability to complete the reclamation, water treatment, water management and mitigation obligations the remain in West Virginia

If ANR seeks to sell assets associated with the Delbarton, Mammoth or Marfork mining complexes, it must receive the prior approval of West Virginia Department of Environmental Protection

● See WV GRA paragraph 7 (a) and (b) for additional information

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Distribution Overview

● Each stock class is entitled to a certain percentage of any distribution which are discussed in detail on the following slides

● Distributions include dividends, liquidating distributions or through the sale of the company, which are treated as liquidating distributions under the Certificates of Designations for Holdings and ANR

● Stock repurchases are prohibited by the Certificates of Designations for the Preferred Stock for as long as they remain outstanding

● The Contingent Revenue Payment obligation and the reclamation settlements with various regulatory agencies (the “Global Reclamation Agreements” or “GRA”), which were all crafted and approved as a part of the Plan of Reorganization, contain restrictions on distributions unless or until certain milestones have been achieved

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Restrictions on Distributions

● Under the Certificate of Designations for the Preferred Stock, no distributions can be made if ANR has not expressly reserved Unrestricted Cash to satisfy any outstanding obligations under the Contingent Revenue Payment obligation or the Global Reclamation Agreements with the various regulatory agencies

Unrestricted Cash is defined as cash and cash equivalents not subject to any lien, encumbrance, or contractual or legal restriction or use by ANR

– Cash that backstops surety bonds or that was posted as part of the GRA to serve as a pool bond for the self-bonded sites is considered Restricted Cash

– There are no expressly reserved Unrestricted Cash at present

● Specific Restrictions

CRP - expressly reserved Unrestricted Cash must equal all amounts due and payable plus all amounts accrued but not yet due and payable under the CRP plus such reserves as the Board of Directors may determine are appropriate

GRA - expressly reserved Unrestricted Cash must equal all amounts due and payable under the GRA (detailed on next slide)

● See ANR CD paragraph (c)(i) for additional information

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Detail on GRA Restrictions

● GRA obligations

No Distribution can be made until all bonding, reclamation, water treatment and water management obligations have been fully funded or otherwise provided for to the satisfaction of the regulatory agencies

– Bonding » Replacement of remaining self-bonds in West Virginia (ANR estimates that ~$100 million of

bond releases and/or additional surety bonds are needed at present based on the assumption that we will be able to convert the $39 million of LCs and Restricted Cash and $6.3 million of mortgages currently held as pool bond into individual bonds at the conclusion of the GRA)

» Other states are covered by surety bonds

– Reclamation, water treatment and water management obligations are satisfied » Option 1 – Distributions can occur once all these obligations have been fulfilled and permits and

surety bonds released under the applicable statutory and regulatory regime

» Option 2 – Distributions can occur once the Company has reached an agreement with each regulatory agency regarding the amount of funding to place in the Restricted Cash Reclamation and Restricted Cash Water Treatment Accounts for each state and has fully funded those accounts with cash above and beyond what secures the surety bonds

Bonding requirements and the cost of completing reclamation, treating water, and satisfying water management obligations are subject to adjustment or change due to changes in regulatory requirements or on-the-ground conditions

Note, the GRA also has other requirements with respect to the use of proceeds from the merger or sale of assets of the Company

See, for example, WV GRA paragraph 7(c) for additional information

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Management Incentive Equity

● The Certificate of Designations for the Preferred Stock of ANR filed along with the Amended and Restated COIs of Incorporation dated July 26, 2016, granted the Board of Directors authority to create a Management Incentive Equity class of stock

This stock class would be entitled to 10% of the Distributions to be deducted pro rata from the other stock classes

See CD with Amended and Restated Certificate of Incorporation of ANR dated July 26, 2016 paragraph (k) for additional information

● The Board approved an Amendment to the Certificate of Designations to create a new class of common stock for the Management Incentive Equity and that Amendment was filed on January 31, 2017

See Amendment No. 1 to the ANR CD

● The Management Incentive Equity aligns the interests of management and all stockholders with respect to fulfilling obligations as quickly as possible

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Distribution Waterfall

● ANR, Inc. waterfall

10% of total distributions will be distributed to holders of Management Incentive Equity, with the balance of all distributions going to Preferred A and B stockholders and Common C-1 and C-2 stockholders

Until such time as ANR has distributed $75 million to holders of Preferred A, Preferred B and Common C-1 and C-2 stock:

– 79% of Distributions as follows: » 65% to holders of Preferred A Stock » 3% to holders of Preferred B Stock » 32% to holders of Common C-1 Stock

– 21% to holders of Common C-2 Stock

From the time that ANR has distributed at least $75 million to holders of Preferred A, Preferred B and Common C-1 and C-2 stock:

– 79% of Distributions as follows: » 50% to holders of Preferred A Stock » 3% to holders of Preferred B Stock

» 47% to holders of Common C-1 Stock


● See ANR CD paragraph (c)(ii) for additional detail

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Distribution Waterfall

● Alpha Natural Resources Holdings, Inc. waterfall

Until such time as Holdings has distributed $15.75 million:

– 65% to holders of Preferred A Stock

– 3% to holders of Preferred B Stock


From the time that Holdings has distributed at least $15.75 million:

– 50% to holders of Preferred A Stock

– 3% to holders of Preferred B Stock


See Holding CD paragraph (c)(ii) for additional information

● Only cash distributed by Holdings will come from ANR distributions to Holdings as the ANR Common C-2 stockholder

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Liquidating Distributions

● In the event of liquidating distributions, including but not limited to a merger, consolidation or combination of business or sale of substantially all of the assets of ANR, that results in a distribution of cash to Preferred or Common stockholders, then the following distribution waterfall applies:

First, $50 will be paid to the holders of the Preferred A stock and these stockholders will split this payment pro rata based on their ownership percentage

Second, $50 will be paid to the holders of the Preferred B stock and these stockholders will split this payment pro rata based on their ownership percentage

Then the ANR, Inc. waterfall detailed on slide 13 applies, with the only change being that the pro rata amounts of the $50 payment described above is credited against the distributions

● See ANR CD paragraph (d) for additional information

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FIRPTA (U.S. Real Property Holding Corporation)

● The Foreign Investment in Real Property Tax Act of 1980 imposes additional tax obligations on non-US owners of securities in companies that are deemed to be U.S. Real Property Holding Corporations

Companies that have more than 50% of their assets in US real estate interests are deemed to be U.S. Real Property Holding Corporations

● Old Alpha was likely a U.S. Real Property Holding Corporation but no determination has been made as to ANR

● ANR is completing its “Fresh Start Accounting” and its 2016 Audited Financial Statements, which will allow it to analyze whether it qualifies under the definition

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Forward Looking Statements

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This document includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Alpha's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Alpha's control. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

• our liquidity, results of operations and financial condition;

• depressed levels or declines in coal prices;

• worldwide market demand for coal, electricity and steel, including demand for U.S. coal exports;

• utilities switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;

• reductions or increases in customer coal inventories and the timing of those changes;

• our production capabilities and costs;

• inherent risks of coal mining beyond our control;

• changes in environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers' coal usage, including potential climate change initiatives;

• changes in safety and health laws and regulations and their implementation, and the ability to comply with those changes;

• competition in coal markets;

• future legislation, regulatory and court decisions and changes in regulations, governmental policies or taxes or changes in interpretation thereof;

• our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;

• changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed contract terms;

• our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interests;

• attracting and retaining key personnel and other employee workforce factors, such as labor relations;

• the geological characteristics of the Central Appalachian coal reserves;

• funding for and changes in employee benefit obligations;

• cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;

• reclamation and mine closure obligations;

• our assumptions concerning economically recoverable coal reserve estimates;

• our ability to negotiate new United Mine Workers of America ("UMWA") wage agreements on terms acceptable to us, increased unionization of our workforce in the future, and any strikes by our workforce;

• disruptions in delivery or changes in pricing from third party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives and tires;

• inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;

• railroad, barge, truck and other transportation availability, performance and costs;

• disruption in third party coal supplies;

• the consummation of financing or refinancing transactions, acquisitions or dispositions and the related effects on our business and financial position;

• our indebtedness and potential future indebtedness;

• our ability to generate sufficient cash or obtain financing to fund our business operations;

• our ability to obtain or renew surety bonds on acceptable terms or maintain self-bonding status;

Forward-looking statements in this document or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Alpha to predict these events or how they may affect the Company. Alpha has no duty to, and does not intend to, update or revise the forward-looking statements in this document. In light of these risks and uncertainties, investors should keep in mind that the results, events or developments disclosed in any forward-looking statement made in this news release may not occur.

Additional Resources

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• For more information about ANR, please visit our website at alphanr.com and click on the Investor’s tab for additional documents regarding the company, including letters to stockholders dated December 15, 2016 and March 20, 2017

• Please visit the bankruptcy case website at http://www.kccllc.net/alpharestructuring for more information regarding the Plan of Reorganization and other key elements of our Chapter 11 reorganization

• Please email [email protected] with questions regarding the company



mailto:[email protected]

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