Alpha files for Chapter 11 bankruptcy protection

The battered U.S. coal industry suffered another big setback on Monday as its second-biggest company filed for bankruptcy court protection.

“The Board of Directors of Alpha Natural Resources authorised the filing of the Chapter 11 cases to enhance the company’s future as it weathers a historically challenged coal market”, the company said.

Alpha has secured a debtor-in-possession financing package of up to about $692 million that will help it to reorganize. The company said that it will promptly seek the necessary relief from the court that will allow its normal business operations to continue uninterrupted.

A steep drop in coal prices has Alpha and its rivals bleeding cash and choking on debt taken on to finance acquisitions from earlier this decade, when the industry’s outlook was rosier.

Alpha Natural Resources has idled or closed more than 80 mines since July 2011, fired 6,500 workers, and cut capital expenditures by 55% to $225 million in 2015, but those measures were not enough to avert a bankruptcy filing.

Patriot Coal and Walter Energy have also filed for bankruptcy within the last two years.

“I am confident Alpha will emerge from this process as a stronger company, with a diversified resource base and better positioned for the future”. Alpha affiliates operate more than 50 underground and surface mines and more than 20 coal preparation facilities in Virginia, Kentucky, West Virginia, Pennsylvania and Wyoming.

In a statement, Alpha blamed a handful of factors for the “unprecedented period of distress” for the industry, including cheap natural gas prices, a bloated coal market, low prices and increased government regulations that have encouraged electric utilities to move away from coal. “There is no doubt more uncertainty ahead, but also transformational opportunity in the coal sector for those who make proactive, strategic decisions”.

Alpha, one of the largest U.S. coal producers, isn’t entering chapter 11 with a restructuring plan in place, but did say in a filing accompanying its bankruptcy petition that it doesn’t want to immediately sell itself “at a low point in the coal market”.

Alpha today launched www.alpharestructuring.com to provide stakeholders with information about the bankruptcy process and legal filings made with the Court.