The collapsing coal market has hit hard in the US, with major coal miner Alpha Natural Resources filing for bankruptcy.
The miner yesterday filed for Chapter 11 bankruptcy “to enhance the company's future as it weathers a historically challenged coal market,” Alpha stated.
“The relief provided by Chapter 11 will allow the company to reorganise and emerge as a financially viable business that is better positioned to compete in dynamic energy markets.”
Following this filing the miner can now apply for relief from the bankruptcy court, which will allow for normal business operations to continue, with coal being mined and orders being fulfilled, as well as its workers being paid.
Alpha CEO Kevin Crutchfield explained that “while a difficult decision, this voluntary Chapter 11 filing is the right strategy at the right time for the future of our business”.
“It will enable us to build on the significant steps we have taken over the past several years to restructure our debt and protect our operations. I am confident Alpha will emerge from this process as a stronger company, with a diversified resource base and better positioned for the future."
He went on to outline the weak coal market, competition from natural gas, the ongoing oversupply in the market, and low demand as the drivers behind Alpha’s collapse.
However he “emphasises that neither Alpha nor the U.S. coal industry should be thought of in the past tense – while the sector will likely get smaller, coal will continue to play a critical role in providing affordable and reliable electricity and in the production of steel for infrastructure”.
"The change and challenges the U.S. coal industry has experienced over the last several years are greater than any in the past three decades," Crutchfield said.
"There is no doubt more uncertainty ahead, but also transformational opportunity in the coal sector for those who make proactive, strategic decisions."
Alpha, which is the second largest coal miner in the US, reportedly has assets of around US$10.1 billion and liabilities of around US$7.1 billion.
“The company has secured an 18-month Debtor-in-Possession (DIP) financing package totalling up to approximately US$692 million, arranged by Citigroup, and led by a group of both its first and second lien lenders,” Alpha said in a company statement.
“The DIP financing package demonstrates the support of its secured creditors and provides the company with significant operational flexibility to successfully reorganise”.