Energy Corp. of America receives default notice after losing court case

New York, Jan. 28 - Energy Corp. of America said it received a notice of default from its bank lenders and has entered into a forbearance agreement after losing a court case with holders of its $200 million 9½% senior subordinated notes.

The notice, from administrative agent Wells Fargo Foothill Inc., says a cross-default has occurred on the credit facility following a notice of default from noteholders and the company's loss of the court case.

Energy Corp. of America also entered into a forbearance agreement with Wells Fargo Foothill that runs through March 15. Under the agreement, the lenders will continue to fund advances under the $50 million revolving credit facility, according to an 8-K filing with the Securities and Exchange Commission on Jan. 27.

Denver-based Energy Corp.'s problems started when it sold an indirect subsidiary, Mountaineer Gas Co., in August 2000.

On Dec. 27, 2001, some noteholders sent a notice to the company saying it was in default because it had not offered to buy back notes using part of the proceeds from the sale of Mountaineer as, the holders claimed, was required by the note indenture.

Energy Corp. originally obtained a favorable court ruling supporting its position, but the noteholders appealed. On Dec. 15, the U.S. Court of Appeals for the Fourth Circuit reversed the order of the district court, according to the SEC filing. The company's request for a rehearing was denied.

A district court hearing is now scheduled for Feb. 12.

Energy Corp. said it is in negotiations with the noteholders in an effort to resolve the dispute.

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