US coal miner Alpha Resources files for bankruptcy
04 August 2015
Even as President Barack Obama unveiled the new Climate Act that is expected to hit the coal industry, Alpha Natural Resources Inc, the second-biggest coal miner in the US, has filed for Chapter 11 bankruptcy protection, the latest in a series of insolvencies in the struggling mining sector due to weak commodity prices high debt.
The embattled miner's chairman and CEO Kevin Crutchfield said in a statement: ''The board of directors of Alpha Natural Resources authorized the filing of the Chapter 11 cases to enhance the company's future as it weathers a historically challenged coal market.''
''The relief provided by Chapter 11 will allow the company to reorganize and emerge as a financially viable business that is better positioned to compete in dynamic energy markets,'' Crutchfield added.
The voluntary petitions for restructuring have been filed with the US bankruptcy court in Richmond, Virginia. Alpha has assets worth $10.1 billion and liabilities of $7.1 billion, and has around 8,000 employees.
The company reported a loss of $875-million in 2014.
Alpha said it will seek immediate relief to continue normal business covering mining, sales and shipments.
Bristol, Virginia-based Alpha Natural Resources is a key supplier of metallurgical and thermal coal in the US. Alpha and its affiliates operate more than 50 underground and surface mines and more than 20 coal preparation facilities in Virginia, Kentucky, West Virginia, Pennsylvania and Wyoming.
The coal miner, founded in 2002, has grown into a major coal producer through big acquisitions like Foundation Coal for $2 billion in 2009 and Massey Energy for $7 billion two years later. The miner's debt levels shot up following its Massey acquisition.
About three fourth of Alpha's metallurgical coal is destined for exports. Outside the US, the company largely exports coal to Brazil, India, China, Italy, Turkey and Ukraine.
With an estimated 6-per cent rise in Indian steel production in 2015, and a bright long-term outlook, Alpha expects a steady rise in demand.
"While a difficult decision, this voluntary Chapter 11 filing is the right strategy at the right time for the future of our business,'' Crutchfield said.
''I am confident Alpha will emerge from this process as a stronger company, with a diversified resource base and better positioned for the future."
The Company will promptly seek the necessary immediate relief from the Bankruptcy Court that will allow normal business operations to continue uninterrupted while in Chapter 11, with coal being mined, customer commitments honored, and wages and benefits for Alpha's affiliated employees paid.
Alpha is severely affected by rising competition from natural gas, supply glut, low prices and more stringent government regulations.
"The change and challenges the US coal industry has experienced over the last several years are greater than any in the past three decades," Crutchfield said.
However, it is believed that coal will continue to play a critical role in providing affordable and reliable electricity and in the production of steel for infrastructure.
Alpha secured an 18-month debtor-in-possession (DIP) financing package totaling up to approximately $692 million, which provides it with liquidity to support its ongoing operations.
The company does not expect any change in its current management team during the bankruptcy process.