Walter Energy Inc. has filed for bankruptcy protection after
agreeing on a fast-track restructuring process that would hand
ownership of the coal miner to senior creditors.
The company, which has been battered by a sharp drop in coal
prices, plans to swap its senior creditors' debt for ownership of
the company in a chapter 11 restructuring that may largely wipe out
junior creditors and reduce labor and pension costs.
If that process isn't successful, the company said it would
pursue a sale of substantially all its assets through a
court-supervised auction.
The Wall Street Journal reported Tuesday that the company was
close to filing for bankruptcy.
Walter Energy said it has sufficient cash to assure that vendors
and suppliers will be paid in full during the reorganization
process. The company had $434.7 million in cash as of March 31,
according to a regulatory filing.
"In the face of ongoing depressed conditions in the market for
met coal, we must do what is necessary to adapt to the new reality
in our industry," Chief Executive Walt Scheller said in a
statement.
Walter in May warned that it might consider a chapter 11
bankruptcy filing if it couldn't restructure its $3 billion debt
load out of court. It skipped a bond interest payment last month,
entering a 30-day default grace period that expires Wednesday.
A collapse in coal prices has Birmingham, Ala.-based Walter and
its rivals hemorrhaging cash and choking on debt taken on to
finance acquisitions around the start of the decade. Demand for
coal burned by power plants has suffered amid competition from
abundant and relatively clean-burning natural gas.
China's slowing economy has helped drive the price of coal used
in steelmaking down to an 11-year low.
Walter has posted annual losses every year since 2011, when it
loaded up on debt to finance a $3.3 billion acquisition of Canada's
Western Coal Corp.
The deal was part of an ill-timed wave of coal-industry
consolidation, fueled by optimism about China's urbanization that
drove a boom in metallurgical coal used in steelmaking. In 2011,
demand got a temporary jolt from severe flooding in Australia's
Queensland state, which sidelined production there.
Coal miners' woes are coming to a head after years of decline.
In addition to low prices, the industry is also struggling with
obligations tied to mine-cleanup regulation and an underfunded
multiemployer pension plan.
Patriot Coal Corp. filed for chapter 11 bankruptcy protection in
May. Alpha Natural Resources Inc. and Arch Coal Inc. are working
with bankers and lawyers who specialize in helping struggling
companies restructure debt and deal with creditors, The Wall Street
Journal has reported.
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com
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