Blackjewel files for Chapter 11

September 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2019 Issue

In a move to reduce its debt and enhance its financial stability, coal producer Blackjewel LLC, as well as a number of its affiliated entities, has filed voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code.

Blackjewel has filed various motions with the US Bankruptcy Court for the Southern District of West Virginia supporting its reorganisation, including requesting authorisation to continue paying employee wages and providing healthcare and other benefits. The company intends to pay suppliers in full for goods and services provided after the filing date of 1 July 2019.

Although Blackjewel had been able to adequately manage its liquidity and continue its operations for several years while many of its competitors filed for bankruptcy, it recently lost the support of its senior secured lender. This withdrawal impacted short-term liquidity which necessitated the company’s Chapter 11 filing.

Having carefully reviewed the available options, the company determined that a court-supervised reorganisation process was the best way to strengthen its financial foundation and position it to remain a trusted partner to its vendors and customers. The reorganisation under Chapter 11 also means Blackjewel will continue to provide high-quality jobs to thousands of employees, remain a strong contributor to local communities and continue to provide products to the US energy market.

“Today’s announcement represents another significant step in our continued efforts to position the company for long-term success,” said Jeff Hoops, founder and chief executive of Blackjewel. “After carefully evaluating our options, we determined that the best way to solidify our financial position and strengthen our balance sheet was to proceed with a comprehensive financial restructuring under court protection.”

Based in Milton, West Virginia, Blackjewel is one of the nation’s top coal producers supporting both the global steel and power generation industries. Its network of mining complexes is one of the most diversified in the US, including major operations in Appalachia and the Powder River Basin. The company controls more than 1.2 billion tons of high-quality metallurgical and thermal coal reserves.

The company expects its mining operations and customer shipments to continue in the ordinary course throughout the court-supervised reorganisation process.

“Through the hard work and commitment of our employees, we have implemented various proactive measures over the past several years to adapt to the unprecedented challenges in the coal markets and shifts in the regulatory landscape,” said Mr Hoops. “The company has arranged post-petition financing which is subject to court approval.”

The financing is in the form of a debtor-in-possession (DIP) loan of up to $20m.

“Accordingly, no assurance can be given that a reorganisation under Chapter 11 will be successful,” he continues. “If approved, the new DIP financing and cash generated from our ongoing operations is expected to provide the liquidity necessary to support the business during the reorganisation process and allow Blackjewel to continue operations and customer shipments in an uninterrupted manner during the court-supervised process.”

Serving as legal adviser to Blackjewel is Squire Patton Boggs. FTI Consulting has been retained as financial adviser, with Jefferies LLC serving as the company’s investment banker.

Mr Hoops concluded: “We are confident that this restructuring will solidify Blackjewel’s position as a significant participant in the US coal industry for the foreseeable future.”

Fraser Tennant