JANA Partners threatens Ross with legal action over Horizon Natural Resources fees

By Jeff Pines

Washington, Sept. 28 - JANA Partners LLC, a holder of Horizon Natural Resources Co. LLC's senior secured notes, said legal action is not out of the question if Wilbur Ross and Horizon's ad hoc committee take their $3.75 million in fees in stock instead of cash.

The reorganization plan calls for Ross and the committee to take their fees in cash not stock, JANA said.

JANA holds $19 million of the second-tier secured term notes due 2008. Noteholders are supposed to get stock in the newly-formed Newcoal LLC, which bought some of Horizon's assets.

"We were disturbed to learn that in your letter of September 21, 2004, you announced that you will be taking the $3.75 million cash fee in stock - at the offering price to noteholders which is approximately 22% of the current market price of approximately $16.75 million. Accordingly, the ad hoc committee and WLR Coal [Ross' company] will be providing itself with an illegal windfall of approximately $13 million at the expense of its fellow noteholders in violation of the plan," JANA said in a news release containing a copy of its letter to Ross.

Ross made the announcement on Sept. 21, JANA said and the rights offering was for Sept. 22. Rescissions were due Sept. 28.

Third Point Management Co. LLC, which also sent Ross a letter expressing its disapproval, estimates the fee equals 2.48 million shares. Third Point holds $37 million of the notes.

Horizon, an Ashland, Ky.-based coal mining company, filed for bankruptcy on Nov. 13, 2002. Its Chapter 11 case number is 02-14261.

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