James River Coal Co. (JRCC), an unprofitable producer of the fuel in the eastern U.S., hired Perella Weinberg Partners LP to advise on the restructuring of its debt, according to people familiar with the matter.
Restructuring advisers including Blackstone Group LP (BX) have been pitching creditors, who have not yet formed an official negotiating group, said the people, who asked not be named because the discussions haven’t been made public.
The Richmond, Virginia-based coal company’s Chairman and Chief Executive Officer Peter Socha declined to comment on the company’s plans. Spokesmen for Perella Weinberg and Blackstone declined to comment on James River.
James River, which has closed mines and hasn’t posted an annual net profit since 2010, is among U.S. coal producers hurt by a decline in the price of the commodity. Booming natural gas output from shale rock in recent years has spurred some utilities to switch to gas from thermal coal for electricity generation. For metallurgical coal used in steelmaking, rising Australian output has helped create a global surplus.
Those pressures have contributed to mine shutdowns across the U.S., the firing of thousands of miners and the loss of millions of tons of domestic coal production. Patriot Coal Corp., one of the largest U.S. producers by volume, exited Chapter 11 bankruptcy in December after filing for reorganization in July 2012.
“It’s been no secret that they’ve been in need of some kind of capital in some kind of way,” James Rollyson, a Houston-based analyst with Raymond James Financial Inc., said by phone today. “There’s a few other guys that, if conditions stay the way they’ve been in the metallurgical-coal market, could be going the same way.”
James River fell 19 percent to 89 cents at the close in New York trading. That’s the lowest price in nine years, according to Bloomberg data, giving the company a market value of $32.1 million. It has lost more than $1.5 billion of market value since June 23, 2008, when its closing share price peaked at $62.14.
The company’s $270 million of 7.875 percent bonds coming due in April 2019 traded at 26.75 cents on the dollar to yield 46 percent on Jan. 22, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
James River has $473 million of bonds outstanding, according to data compiled by Bloomberg. The company’s debt tumbled 43 percent last year, the worst performer among debentures from 12 U.S. coal operators, Bloomberg bond index data show.
James River filed for Chapter 11 bankruptcy protection in 2003, according to data compiled by Bloomberg. It emerged from bankruptcy the following year, according to Moody’s Investors Service.
James River’s coal production was 9.5 million tons in 2012. The price for Central Appalachian thermal coal, the U.S. benchmark for supplies of the commodity burned as fuel, has fallen for three consecutive years.
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