International Coal Group Announces Anticipated Make-Whole Fundamental Change Relating to Its 4.00% Convertible Senior Notes Due 2017

SCOTT DEPOT, W.Va., June 9, 2011 /PRNewswire/ -- International Coal Group, Inc. (NYSE: ICO) (the "Company") announced today an anticipated Fundamental Change and Make-Whole Fundamental Change with respect to its 4.00% Convertible Senior Notes due 2017 (the "Securities").

As previously announced, the Securities became convertible as of April 1, 2011 because the closing sale price of the Company's common stock, par value $0.01 per share (the "Common Stock"), on the New York Stock Exchange exceeded the conversion trigger price of $7.55 per share for each of 20 or more trading days in the period of 30 consecutive trading days ended March 31, 2011.  Accordingly, the Securities currently are convertible at a conversion rate of 172.0874 shares of Common Stock per $1,000 principal amount of Securities.

In accordance with the indenture governing the Securities (as supplemented or amended, the "Indenture"), the Securities will remain convertible as a result of an anticipated Fundamental Change and Make-Whole Fundamental Change relating to the transactions described below.  In addition, in connection with the Make-Whole Fundamental Change that would occur upon the consummation of the Merger (as defined below), the conversion rate applicable to each Security that is surrendered for conversion at any time during the Make-Whole Conversion Period described below will be increased to reflect  the Make-Whole Applicable Increase.

As previously announced, on May 16, 2011, pursuant to the Agreement and Plan of Merger, dated as of May 2, 2011 (the "Merger Agreement"), by and among Arch Coal, Inc. ("Arch"), Atlas Acquisition Corp. (the "Purchaser") and the Company, the Purchaser commenced a tender offer (the "Offer") to acquire all of the Company's outstanding shares of common stock at a price of $14.60 per share in cash, net to the seller, without interest and less any applicable withholding taxes (the "Merger Consideration").  The Offer will expire at 8:00 a.m., New York City time, on Tuesday, June 14, 2011, unless the Offer is extended or earlier terminated in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") and the Merger Agreement.  The consummation of the Offer would constitute a Fundamental Change.

Upon the consummation of the Offer, the Purchaser is expected to merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Arch (the "Merger").  The consummation of the Merger would constitute a Make-Whole Fundamental Change because, upon consummation of the Merger, each outstanding share of Common Stock would be converted into the right to receive the Merger Consideration.

The anticipated effective date of the Merger is expected to occur as soon as practicable after the consummation of the Offer. Solely for the purpose of providing notice under the Indenture, the Company currently anticipates that the date on which the Make-Whole Fundamental Change relating to the Merger will become effective is June 15, 2011.

Pursuant to the Indenture, holders may surrender Securities for conversion at any time through the period ending on, and including, the Fundamental Change Repurchase Date (as defined below), which the Company will publicly announce in a notice (the "Fundamental Change Notice") to be sent to each holder within 20 business days after the actual consummation of the Offer.

Holders should be aware that the Indenture governs the conversion procedure for Securities surrendered for conversion.  In this regard, if the Merger is consummated, if a holder converts its Securities on or after the effective date of the Merger, the Securities will be convertible into the same type (and same proportions) of the Merger Consideration received by holders of Common Stock in the Merger, and the Company will execute with the Trustee a supplemental indenture providing for such change in the right to convert the Securities.  

In addition, notwithstanding anything in the Indenture to the contrary, the conversion rate applicable to each Security that is surrendered for conversion in accordance with the Indenture, at any time during the period (the "Make-Whole Conversion Period") from, and including, the effective date of the Make-Whole Fundamental Change relating to the Merger to, and including, the Fundamental Change Repurchase Date shall be increased to an amount equal to the conversion rate that would otherwise apply, plus an amount equal to the Make-Whole Applicable increase described below.

If the Merger is consummated, a Make-Whole Fundamental Change will occur and the conversion rate applicable to the Securities that are surrendered for conversion during the Make-Whole Conversion Period will be increased pursuant to the Indenture.  The increase in the conversion rate (the "Make-Whole Applicable Increase") will be determined by reference to the amount set forth in the table in the Indenture that corresponds to the effective date and the applicable price of the Make-Whole Fundamental Change.  The applicable price with respect to the Make-Whole Fundamental Change relating to the Merger would be equal to the Merger Consideration of $14.60 per share of Common Stock in cash.

Accordingly, if the Merger is consummated on June 15, 2011, then, in accordance with the Indenture, the Make-Whole Applicable Increase applicable to Securities surrendered for conversion during the Make-Whole Conversion Period would be equal to 7.0006 shares of Common Stock per $1,000 principal amount of Securities and, upon surrender of Securities for conversion in connection with the Make-Whole Fundamental Change resulting from the Merger pursuant to the Indenture, the Company's conversion obligation shall be calculated based solely on the Merger Consideration and shall be deemed to be an amount equal to, per $1,000 principal amount of converted Securities, the applicable conversion rate of 179.0880 shares of Common Stock per $1,000 principal amount of Securities (which includes the Make-Whole Applicable Increase), multiplied by the Merger Consideration.

Based on the above, it is estimated that holders of Securities surrendered for conversion during the Make-Whole Conversion Period would be entitled to receive, at settlement, $2,614.6848 in cash for each $1,000 principal amount of Securities surrendered for conversion.

In connection with the Merger, only holders who convert their Securities during the Make-Whole Conversion Period shall be entitled to receive the Make-Whole Applicable Increase.

Please refer to the Indenture for a more complete description of the increase in the conversion rate applicable in connection with the Make-Whole Fundamental Change relating to the Merger.

A holder may convert a portion of a Security, but only if that portion is an integral multiple of $1,000 in principal amount.

The Trustee has informed the Company that, as of the date of this notice, Cede & Co., as nominee for participants in The Depository Trust Company ("DTC"), is the sole registered holder of the Securities, all custodians and beneficial holders of the Securities hold the Securities through DTC accounts and there are no certificated Securities in non-global form.  To convert a beneficial interest in a Security that is a global note, the holder must, in addition to complying with any other rules and procedures of DTC:

(1) cause there to be completed and delivered an appropriate instruction form for conversion, in accordance with the rules and procedures of DTC;

(2) cause there to be delivered to the Conversion Agent, through the facilities of DTC, in accordance with the rules and procedures of DTC, the interest in the global note to be converted;

(3) pay the amount of interest, if any, the holder must pay in accordance with the Indenture; and

(4) pay any tax or duty if required pursuant to the Indenture.

If the Offer is consummated, then, in accordance with the Indenture, the Company will mail, or cause to be mailed, to all holders of Securities a Fundamental Change Notice within 20 business days after the occurrence of the Fundamental Change resulting from the consummation of the Offer.  This Fundamental Change Notice will set forth the information required by the Indenture, including but not limited to, the date of the Fundamental Change, the Fundamental Change Repurchase Date and the Fundamental Change Repurchase Price, as described below.

Upon the Fundamental Change that would result upon consummation of the Merger, each holder of Securities would have the right, at such holder's option, to require the Company to repurchase all of such holder's Securities (or portions thereof that are integral multiples of $1,000 in principal amount), on a date selected by the Company (the "Fundamental Change Repurchase Date"), which shall be no later than 35 days, nor earlier than 20 days, after the date the Fundamental Change Notice is mailed in accordance with the Indenture.

Upon the satisfaction of the requirements of the Indenture, the holder's repurchase option would require the Company to repurchase all of such holder's Securities at a price, payable in cash, equal to 100% of the principal amount of the Securities (or portions thereof) to be so repurchased, plus accrued and unpaid interest, if any (the "Fundamental Change Repurchase Price") to, but excluding, the Fundamental Change Repurchase Date.

A holder will be entitled to withdraw its election in the Purchase Notice prior to the close of business on the business day immediately preceding the Fundamental Change Repurchase Date.  In addition, as described above, Securities will remain convertible to, and including the Fundamental Change Repurchase Date, but the Securities with respect to which a Purchase Notice is given by a holder may be converted pursuant to the Indenture only if such Purchase Notice has been withdrawn in accordance with the Indenture.

Please refer to the Fundamental Change Notice, when available, for a more complete description of the Fundamental Change Repurchase Right, including, without limitation, any differences in consideration payable to holders in connection with a repurchase upon Fundamental Change as compared to a conversion of the Securities.

The Bank of New York Mellon Trust Company, N.A., the Trustee under the Indenture, is acting as Conversion Agent.  Its contact information follows:

2 North La Salle Street
Chicago, Illinois 60602
Facsimile: (312) 827-8542
Attention: Corporate Trust Administration

Please refer to the Indenture for a more complete description of the convertibility of the Securities, the consideration due upon conversion and when such consideration must be paid by the Company.

General Information

The Company is a leading producer of coal in Northern and Central Appalachia and the Illinois Basin. The Company has 13 active mining complexes, of which 12 are located in Northern and Central Appalachia and one in Central Illinois. The Company's mining operations and reserves are strategically located to serve utility, metallurgical and industrial customers domestically and internationally.

Important Additional Information

This announcement is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell securities. Arch has filed with the SEC a tender offer statement on Schedule TO on May 16, 2011, as amended through the date of this release. The Company filed a tender offer solicitation/recommendation statement on Schedule 14D-9 with the SEC on May 16, 2011, as amended through the date of this release. The tender offer statement (including an offer to purchase, a related letter of transmittal and other tender offer documents) and the solicitation/recommendation statement contain important information that should be read carefully before making any decision to tender securities in the Offer. Company stockholders may obtain a free copy of these materials (and all other tender offer documents filed with the SEC) on the SEC's website: www.sec.gov. The Schedule TO (including the offer to purchase and related materials) and the Schedule 14D-9 (including the solicitation/recommendation statement) may also be obtained for free by contacting Innisfree M&A. Stockholders may call toll free (877) 717-3922. Banks and brokers may call collect (212) 750-5833.

Statements in this press release that are not historical facts are forward-looking statements and may involve a number of risks and uncertainties. We have used the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project" and similar terms and phrases, including references to assumptions, to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to various risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.

SOURCE International Coal Group, Inc.