Walter Energy Co. filed for bankruptcy after reaching a deal that would hand control of the struggling miner to key creditors, in the second corporate failure of the day tied to falling coal and oil prices.
Walter blamed an interest burden of $264 million a year and “crippling” labor costs for its Wednesday filing. Slowing demand from China, the biggest buyer of metallurgical coal, has sent the benchmark price down to $93 a metric ton since July 1, less than half of where it was three years earlier.
The deal with senior lenders would cut the interest bill by turning $1.8 billion of their loans into equity. In August, mine workers would be asked to take cuts in wages and benefits, the company said. Walter aims to make the restructuring proposal final in a Birmingham, Alabama, court within seven months.
Apollo Global Management LLC, Blackstone Group LP’s GSO Capital Partners, Fidelity Investments and KKR & Co. were among senior lenders pushing for an agreement, two people with knowledge of the talks said before the filing.
They proposed cutting worker pay by 20 percent while giving mining unions an equity stake, said the people, who requested anonymity because the talks were private.
The United Mine Workers of America said on its website that it would fight for members and their families while the bankruptcy plays out.
Representatives of Apollo and Blackstone didn’t respond to e-mails asking whether they were taking part in the swap announced Wednesday. KKR declined to comment and Fidelity said it couldn’t immediately comment.
Unsecured lenders, who weren’t mentioned as being part of the negotiated pact with top-tier creditors, hold around $770 million of Walter’s debt. The company listed around $5 billion in debt in all.
“This restructuring plan provides a road map for Walter Energy to establish a sustainable capital structure, make further changes to operational cost drivers, and ensure that the company can continue to operate safely and competitively,” Chief Executive Officer Walt Scheller said in a statement.
To ensure the company gets the best value for its assets, Walter said it will take bids for better offers than the one from senior lenders in a court auction next month. Operations outside the U.S. aren’t part of the bankruptcy.
Walter’s filing follows Patriot Coal Corp.’s May bankruptcy petition, its second. Last year, James River Coal Co. also sought court protection for a second time.
Oil explorers are also feeling the sting of a price slump. Earlier Wednesday, Sabine Oil & Gas Corp. filed for bankruptcy after crude prices cratered, joining American Eagle Energy Corp., Dune Energy Inc. and Quicksilver Resources Inc.
The case is In Re Walter Energy Inc., 15-02741, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).