SALT LAKE CITY — The state of Utah has apparently won a bid for U.S. Magnesium's bankruptcy assets with plans to conduct environmental remediation and give the water to the Great Salt Lake.
A filing with U.S. Bankruptcy Court in Delaware, obtained by FOX 13 News, announced that Utah's Division of Forestry, Fire & State Lands had been selected as the winner of the "stalking horse bid" for U.S. Magnesium. LiMag, which is an affiliate of U.S. Magnesium's parent company, came in second.
A "stalking horse bid" is a pre-determined bid before an auction for bankruptcy assets takes place. A judge was expected to sign off on the bid during a hearing in Delaware on Tuesday while hearing any objections.
Records filed in the bankruptcy court and reviewed by FOX 13 News show that the state will spend roughly $30 million in taxpayer dollars for U.S. Magnesium's assets. Utah's Division of Forestry, Fire & State Lands has been waging a legal battle with U.S. Magnesium over control of its leases to operate on the Great Salt Lake.
The agency raised concerns of a waste pond and whether anyone was managing it, given U.S. Magnesium's bankruptcy, expressing fears that it could leak into the lake. The company declared bankruptcy last year. That delayed the state's plans to revoke U.S. Magnesium's assets.
Some of U.S. Magnesium's creditors said in a declaration filed in court that "the Debtor’s sale of assets to FFSL pursuant to the Successful Bid appears to be in the best interests of the Debtor and its estate."
"Significantly, the Successful Bid provides for the payment of $30 million for the purchase of certain unencumbered assets—assets that various other parties in this case claimed had no value," it said, referencing claims made in court that mineral rights on the site "have no value."
"The Successful Bid unquestionably represents both a higher and better offer than the Next-Highest Bid offered by LiMag Holdings, LLC. Not only does the Successful Bid create more value for the estate, the Successful Bid also removes at least two major impediments existing in the LiMag offer: (a) the required assumption and assignment of the Mineral Lease over FFSL’s objection and (b) understandable concerns with the insider and related party attributes of any transaction with LiMag," the declaration said.
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