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Rhino dividing up US coal operations for quick bankruptcy sale

The latest company in a string of coal bankruptcies will take a slightly different approach than its peers as it auctions off properties in a bid to attract higher value for its assets.

Rhino Resource Partners LP filed for bankruptcy reorganization July 22. While many coal companies in the past few years have gone to the auction block with an eye on selling nearly all of their prime assets to one buyer, Rhino is offering up groups of assets a la carte.

The company's bankruptcy sale process splits Rhino's assets into six groups. Those include one asset group that is all accounts receivable and the inventory at four mining operations across Appalachia and Utah. The other asset groups consist of the company's CAM Mining subsidiary with two metallurgical coal mines in West Virginia and Kentucky; the Castle Valley thermal coal operations in Utah; the Hopedale thermal coal operations in Ohio; and the Jewell Valley metallurgical coal operations in Virginia that were purchased in Blackjewel LLC's bankruptcy reorganization. A sixth asset group will bundle coal reserves in West Virginia, Colorado, Pennsylvania, Ohio and Illinois with a Colorado coal mine, a Virginia processing plant and a coal dock in Ohio.

Energy Ventures Analysis is providing financial advisory services in connection with the proposed sale process.

"The use of asset groups makes sense for Rhino given the diversity of its holdings and the current state of the market," said Emily Medine, a principal at Energy Ventures Analysis. "Parties that have some relationship to each asset, be it market, location, quality, or reserve ownership, may be able to realize enhanced benefits from those assets."

Separate bids for the asset groups will also make the review process more efficient, Medine said. That is particularly important given the compressed timetable for the auction. The proposed sale process includes an Aug. 19 deadline for bids, with an auction set for Aug. 25.

A group of Rhino's pre-petition lenders set a bar for assessing the bids with a $40.0 million stalking horse bid for substantially all of Rhino's assets, according to an asset purchase agreement filed with the bankruptcy court.

Rhino filed for bankruptcy reorganization through the U.S. Bankruptcy Court for the Southern District of Ohio with approximately $162.1 million of liabilities, including $39.8 million in secured debt owed to its pre-bankruptcy lenders. The company recently idled several of its operations due to the COVID-19 pandemic, adding to general distress caused by weaker coal markets, the company wrote in bankruptcy filings.

The company tried to return to positive cash flow by suspending distributions, downsizing and other efforts but ultimately was pushed to file for Chapter 11 bankruptcy.

"Notwithstanding these efforts, the debtors have been unable to overcome the pressures placed on their profit margins from steadily declining coal prices (along with burdensome regulations and the accompanying decline in demand for coal), all of which have contributed to the debtors' substantial negative cash flow," Rhino President and CEO Richard Boone wrote in a bankruptcy court declaration.