0001140361-15-022117.txt : 20150528 0001140361-15-022117.hdr.sgml : 20150528 20150528164558 ACCESSION NUMBER: 0001140361-15-022117 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20150528 DATE AS OF CHANGE: 20150528 GROUP MEMBERS: ALAN COOPER GROUP MEMBERS: JET CAPITAL MANAGEMENT, L.L.C. GROUP MEMBERS: JET CAPITAL MASTER FUND, LP GROUP MEMBERS: JET CAPITAL SPECIAL OPPORTUNITIES MASTER FUND, LP GROUP MEMBERS: JET CAPITAL SRM MASTER FUND, LP GROUP MEMBERS: MATTHEW MARK SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SunCoke Energy, Inc. CENTRAL INDEX KEY: 0001514705 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 900640593 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-86939 FILM NUMBER: 15895995 BUSINESS ADDRESS: STREET 1: 1011 WARRENVILLE ROAD STREET 2: SUITE 600 CITY: LISLE STATE: IL ZIP: 60532 BUSINESS PHONE: 630-824-1000 MAIL ADDRESS: STREET 1: 1011 WARRENVILLE ROAD STREET 2: SUITE 600 CITY: LISLE STATE: IL ZIP: 60532 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JET CAPITAL INVESTORS L P CENTRAL INDEX KEY: 0001278235 IRS NUMBER: 030460065 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 540 MADISON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123722510 MAIL ADDRESS: STREET 1: 540 MADISON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 formsc13da.htm JET CAPITAL INVESTORS, L.P. SC 13DA 5-28-2015 (SUNCOKE ENERGY, INC.)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 

 
SCHEDULE 13D
(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

UNDER THE SECURITIES ACT OF 1934
(Amendment No. 1)

Suncoke Energy, Inc.
(Name of Issuer)
 
Common Stock, $0.01 par value
(Title of Class of Securities)
 
86722A103
(CUSIP Number)
 
Matthew Mark
JET CAPITAL INVESTORS, L.P.
540 Madison Avenue, 17th Floor
New York, New York 10022.
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
 
 
May 28, 2015
 
(Date of Event Which Requires Filing
of this Statement)
 
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d‑1(e), 13d-1(f) or 13d-1(g), check the following box: 

(Continued on following pages)
(Page 1 of 5 Pages)
 


Schedule 13D
Amendment No. 1
 
This Amendment No. 1 to the Statement on Schedule 13D (this “Schedule 13D”) relating to the common stock, $0.01 par value (the “Common Stock”), of Suncoke Energy, Inc., a Delaware company (the “Company”), is being filed by Jet Capital Master Fund LP,  Jet Capital Select Opportunities Master Fund LP, Jet Capital SRM Master Fund, LP, Jet Capital Investors, LP, Jet Capital Management, L.L.C., Alan Cooper and Matthew Mark.
 
Item 4. Purpose of Transaction.
 
Item 4 to this Schedule 13D is amended by adding the following:
 
On May 28, 2015, Mr. Mark sent a letter to the Board of Directors of the Company.  A copy of this letter is filed as Exhibit 99.2 to this Schedule 13D and, to the extent its contents are responsive to this Item 4, incorporated here by reference.
 
Item 7. Material to be Filed as Exhibits.
 
99.1 Agreement of joint filing pursuant to Rule 13d-1(f) promulgated under the Securities Exchange Act of 1934, as amended (previously filed).
 
99.2 Letter, dated May 28, 2015, from Matthew Mark to the Board of Directors of the Company.
 

SIGNATURES
 
After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certifies that the information set forth in this Statement is true, complete and correct.
 
Date:  May 28, 2015

 
JET CAPITAL MASTER FUND, LP
 
By: Jet Capital Management, L.L.C.
 
 
 
By:
/s/
 Matthew Mark
 
 
Name:
Matthew Mark
 
 
Title:
Managing Member
 
       
 
JET CAPITAL SPECIAL OPPORTUNITIES MASTER FUND, LP
 
By: Jet Capital Management, L.L.C.
 
 
By:
/s/
 Matthew Mark
 
 
Name:
Matthew Mark
 
 
Title:
Managing Member
 
       
 
JET CAPITAL SRM MASTER  FUND, LP
 
By: Jet Capital Management, L.L.C.
 
 
By:
/s/
 Matthew Mark
 
 
Name:
Matthew Mark
 
 
Title:
Managing Member
 
       
 
JET CAPITAL INVESTORS, LP
 
By: Jet Capital G.P. L.L.C.
 
 
By:
/s/
 Matthew Mark
 
 
Name:
Matthew Mark
 
 
Title:
Managing Member
 
       
 
JET CAPITAL MANAGEMENT, L.L.C.
 
 
By:
/s/
 Matthew Mark
 
Name:
Matthew Mark
 
 
Title:
Managing Member
 
       
 
Alan Cooper
 
  /s/
Alan Cooper
 
       
 
Matthew Mark
 
  /s/
Matthew Mark
 
 
 
3

EX-99.2 2 ex99_2.htm EXHIBIT 99.2

EXHIBIT 99.2

May 28, 2015

The Board of Directors
Suncoke Energy, Inc.
1011 Warrenville Road, Suite 600
Lisle, Illinois 60532

Dear Members of the Board:

Despite our last letter, our repeated conversations with management regarding return of capital and your assurance to us that “we are all on the same page,” it is clear that it is business as usual at Suncoke (SXC). There is an apparent lack of a sense of urgency at SXC that is hard to understand and impossible to accept. In recent months, management has taken no meaningful actions to create shareholder value, despite clear alternatives within management’s control. The result of the continued inaction is the continued decline of your share price, which has fallen nearly 15% since our last letter, despite stability in your long term contracted operating results. The equity price performance of your steel company customers over that time has been stable to rising. The only reasonable explanation for the market’s distaste for SXC stock is management’s continued lack of any real strategic or capital actions.

In February, when we wrote our first letter, we pointed out that assuming a drop down of all remaining MLPable assets, SXC stock was trading at a 10% yield. This analysis—which we laid out and has not been disputed by management—demonstrates the market’s concern that SXC will not distribute its considerable and stable cash flow to investors and reveals shareholders’ large skepticism about growth scenarios for SXC. That concern and skepticism has only worsened over the past several months, with the shares now trading at close to a 12% yield on a fully dropped down basis. That yield in today’s equity market is without comparison, demonstrating the market’s rejection of management’s current strategy. We think it is clear that management is reluctant to drop assets down to SXCP at prices below its view of fair value, and management remains far too focused on executing low probability growth scenarios, as opposed to implementing a reasonable capital return program. Management’s strategy has perpetuated a negative feedback loop in both SXC and SXCP shares that is so strong that SXC stock now trades at a 10% yield on free cash flow ignoring any incremental dropdowns on assets outside of Granite City. In the absence of incremental dropdowns past Granite City, and based on current guidance and an assumption of no incremental growth at SXC, we see annual free cash flow of approximately $95 million, or $1.50 per SXC share. This $1.50 per share assumes a reasonable reduction in corporate G&A to reflect the scenario in which growth options for SXC are no longer being pursued, as well as maintenance capital spending levels. To be clear, it also reflects the absence of incremental dropdowns, no incremental step up in SXC’s general partner cash flows, and no valuation for SXC’s attractive general partner business model. Against its considerable free cash flow, SXC’s current dividend rate of $0.30 per share is woefully inadequate. We are aware of no other general partner of a MLP that has decided to build capital in perpetuity. SXC’s stated strategy is to continue to drop down its assets into SXCP and generate substantial incremental capital for SXC in the process. That prospect makes SXC’s current dividend rate even more inadequate. It is incredible to us that management has not articulated a capital return policy or justified its reluctance to pay out reasonable shareholder returns.
 
1

We think the explanation is management remains focused on trying to grow through acquisition, and is reluctant to commit to a distribution policy that will constrain its growth options. But after nearly 18 months of effort, management has shown little to no ability to create value through acquisition, pressuring SXCP shares. And at the same time, a refusal to increase shareholder returns has pressured SXC shares. The solution to this negative feedback loop is not trying to find an attractive deal while the company’s cost of capital continues to increase as a result of the lack of action. Rather, it is increasing shareholder returns at SXC, driving its yield to a sustainable and attractive level, lowering its cost of capital, and thereby enhancing SXC’s future ability to grow. The execution of this strategy is entirely within your control. That we have been making this point for months with no real actions or response by management is frustrating. That the entire market demonstrably agrees with us—look at your share price—is more so. In the absence of management’s demonstrated ability to use its general partner structure to generate value for shareholders, we continue to expect you to run a process to explore all strategic options to sell SXC to someone who will. But before doing that, we expect capital returns to increase dramatically.

It is clear that management has also been slow to accomplish incremental dropdowns to SXCP due to a disconnect between its views of the fair value of SXC’s coke assets and SXCP’s conflict committee’s desire to see dropdowns produce accretion to SXCP’s distributions. The slow pace of dropdowns has further perpetuated the negative feedback loop that currently exists between SXC and SXCP. We agree with management that SXCP’s conflict committee seems narrowly focused on accretion, and risks value destruction for their entity with their policies. However, SXCP’s governance is not an excuse for the absence of performance by SXC. Many structuring mechanisms exist that can create mutually beneficial outcomes for both sides, and the MLP industry is ripe with examples of how to break the feedback loop that now appears to be impeding progress. Fixing this problem is also within your control. As shareholders in SXC for essentially its entire history as a public company, we are telling you the time for action is now.

Since our first letter was sent, a large share of SXC shareholders on their own reached out to us expressing support for our views. We have been clear in communicating with management that we are aware of no shareholders who disagree with the sentiments we expressed there and here: Capital returns are far too low and must increase dramatically. Dropdowns should be accomplished. Either SXC should show it can grow past those dropdowns, or it should explore all options toward selling its valuable business model to someone else who will. Doing nothing is not a sustainable strategy for SXC’s board. Our patience has been exhausted.

We, and presumably your other shareholders, look forward to hearing your public response to this letter. But even that response whatever it is will not soothe our concerns. As we have told management, Jet wants to see SXC do things, not talk about doing them.

 
Sincerely Yours,
   
 
Mathew Mark
 
General Partner
 
 
2