Alpha Natural Said Filing for Bankruptcy as Soon as MondayJodi Xu Klein and Laura J. Keller
Alpha Natural Resources Inc. is planning to file for bankruptcy protection in Virginia as soon as Monday as the biggest miner of U.S. coal used in steelmaking struggles amid the worst commodities slump in more than a decade, according to three people with direct knowledge of the matter.
The company’s senior lenders including Citigroup Inc. and Davidson Kempner Capital Management plan to provide a loan to fund the company through bankruptcy, said the people, who asked not to be named because the discussions are private. The company is in talks with the creditors over a plan that would include shutting mines, two of the people said. The conversations continue and the court would have authority over such actions during Chapter 11 proceedings.
Bristol, Virginia-based Alpha Natural would follow rivals Walter Energy Inc., Patriot Coal Corp. and James River Coal Co. in filing for bankruptcy during the past 15 months as met coal prices dropped 72 percent since 2011.
Alpha Natural, despite reporting $1.8 billion in cash and available credit at end of March, hasn’t turned in a profit since 2010, according to data compiled by Bloomberg.
The outlook darkened in May when regulators in Wyoming, where the company has two large mines, told Alpha it no longer had the financial strength to guarantee future clean-up costs. The so-called self-bonding program exempts miners with strong balance sheets from having to set aside cash or other instruments to cover such liabilities. The decision would require the company to post surety bonds or similar instruments to cover $411 million of potential reclamation liabilities.
Alpha Natural has been negotiating with its lenders as it faces an Aug. 1 maturity on $109 million of convertible notes. The company isn’t planning to make the payment, the people said.
Representatives of Alpha Natural, Citigroup and Davidson Kempner declined to comment.
The bankruptcy loan -- known as a debtor-in-possession, or DIP, loan -- could still be contested by a newly formed group of unsecured and convertible bondholders, said three people with knowledge of the matter. The group is putting together a plan possibly with the support of some more-senior lenders, said the people. Providing a DIP will allow the lenders to drive the restructuring process.
The bondholder group, which includes at least eight investment firms, has engaged Milbank Tweed Hadley & McCloy LLP as its legal counsel and is in the process of hiring a financial adviser, the people said.
A spokeswoman for Milbank didn’t immediately respond to telephone and e-mail messages.
Alpha’s $393 million 9.75 percent of senior unsecured bonds maturing in April 2018 last traded at 1.05 cents on the dollar on Wednesday, dropping from 46.1 cents at the beginning of the year, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The company’s stock dropped 30 percent to close at 5.3 cents a share on Thursday in New York. The equity has lost 97 percent in value this year.