Hedge Fund Ousts Coal Exec in Bid to Build Oakland Export Terminal
On Election Day — November 3, 2020 — Los Angeles hedge fund manager Vikas Tandon took over the company formed to build a coal export terminal in West Oakland. Judge Joan Lloyd of the United States Bankruptcy Court in Louisville, Kentucky anointed Tandon the new CEO of Insight Terminal Solutions (ITS). Tandon’s company, Autumn Wind Lending LLC, is now the sole owner of ITS, though whether ITS’s mission to ship coal through Oakland will change under new ownership remains unknown.
For seven years, ITS’s ousted CEO, coal industry veteran John J. Siegel, Jr., dreamed of building a coal export facility in Oakland. In September 2018, he signed a sublease with Phil Tagami for a 19-acre patch of waterfront known as the West Gateway. But ITS quickly burned through a $10.5 million loan from Autumn Wind without making significant progress. Siegel proved unable to attract major funding to build the terminal, at a cost estimated at $250 million, and pay off the loan from Autumn Wind.
In August 2019, in a last-ditch effort to stave off demands from Autumn Wind and other creditors, ITS filed for bankruptcy under Chapter 11.
On November 3rd, Judge Lloyd came ready for a two-day hearing with testimony by live witnesses and voluminous documentary evidence so she could decide which of two competing reorganization plans to approve: one offered by Siegel and one offered by Autumn Wind. Instead, the hearing began with an announcement by Siegel’s attorney that the hearing would be short, because Siegel had found no way to fund his proposal to reorganize ITS and retain his control of the company. Siegel had invested $27 million and had simply run out of money.
Minutes later, the court confirmed Autumn Wind’s reorganization plan.
John Siegel’s dream collapsed in a quagmire of debt and litigation. When he began his effort to build the Oakland coal terminal, he was CEO of Bowie Resource Partners, the largest coal producer in Utah. His deal with developer Phil Tagami to bring coal to Oakland was successfully concealed from the public and Oakland officials for over a year. When the deal was exposed in 2015, the plan aroused massive public opposition. The following year, the City Council adopted a resolution banning coal handling and storage at the West Gateway. Rather than develop the multi-commodity terminal he had originally promised, Tagami took the City to court for the right to ship coal. Although a federal judge invalidated the City’s application of the coal ban to the West Gateway, no private investors have expressed a serious interest in funding construction of a $250 million coal terminal.
Siegel departed from Bowie and founded ITS to continue the effort to build the coal terminal. His last hopes to retain control of ITS met with dismal failure in August when Republican legislators in Utah, who had previously indicated they would back Siegel, dismissed his entreaty for a $20 million bailout to rescue his company from bankruptcy.
The City remains entangled in a costly legal battle with Tagami’s Oakland Bulk and Oversized Terminal LLC. The City maintains that OBOT forfeited its lease when it failed to meet milestones in developing the project. OBOT is suing the City claiming that its failure to meet the milestones resulted from the City’s own actions in enacting a ban on coal handling and storage in 2016. If the City prevails in court, Autumn Wind’s sublease will be worthless.
Despite the risk, Autumn Wind has agreed to sink more money into ITS to pay off third-party creditors and assume the obligations of ITS’s sublease from OBOT. Autumn Wind will pay $4.8 million to OBOT for back rent and shared legal fees; another $2.1 million to Bay Bridge Exports, which kept Siegel afloat during the bankruptcy; and smaller amounts to lawyers, lobbyists, engineers, and the Alameda County recorder’s office. Including its prepetition loans but excluding its legal expenses in the bankruptcy proceedings, Autumn Wind will have invested over $17 million to own contested rights to develop 19 acres of West Oakland waterfront.
Publicly, Autumn Wind has said nothing concrete about its plans for the site. In a June 2020 court filing, Tandon expressed the belief that, “under new management, [Insight] can successfully develop or actively market” its sublease on 19 acres of the former Oakland Army Base. Insight would “actively participate in settling all of the Debtor’s regulatory issues with the City of Oakland, develop the Sublease and maintain the property.” In the alternative, the new management would “solicit competitive bids for the Sublease.”
The resolution of the ITS bankruptcy was also reported by the Institute for Energy Economics and Financial Analysis on 11 Nov 2020: Bankruptcy of Oakland project marks a bellwether moment for U.S. coal export ambitions.