Two more U.S. coal mining companies have filed for bankruptcy as producers across the country struggle to sell coal into the troubled thermal coal market.
White Stallion Energy LLC and Lighthouse Resources Inc. filed voluntary petitions for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Dec. 2 and Dec. 3, respectively. Both companies are looking to sell their assets through a bankruptcy reorganization sale process. Each reported estimated assets of between $100 million and $500 million with liabilities in the same range.
Many large coal producers have resorted to bankruptcy restructurings in recent years. The largest coal company in the U.S., Peabody Energy Corp. recently warned it may need to file for bankruptcy a second time, despite emerging from a restructuring in 2017.
Lighthouse's plans to send coal to Asia bust
Lighthouse, which is headquartered in Utah, operates the Decker mine in Montana and owns various other coal assets. Lighthouse produces low sulfur thermal coal with a focus on power generation markets in Asia. Decker produced 3.6 million tons of coal in 2019, according to U.S. Mine Safety and Health Administration data.
"All of the economic and regulatory issues in the thermal coal space, combined with those specific to the debtors, have caused a liquidity crisis and the need for the relief sought in these Chapter 11 cases," Darin Adlard, vice president of finance and accounting with Lighthouse, wrote in a bankruptcy filing.
Lighthouse faced numerous legal and regulatory obstacles and public opposition in its attempt to develop the Millennium Bulk Terminals-Longview LLC property in Washington into a coal export facility. The effort, which has already taken over eight years, could have bolstered the company's access to Asian coal demand as domestic appetite for the fuel has waned.
Lower coal prices in Asia due to the COVID-19 pandemic drastically reduced demand for Decker's coal, Adlard wrote.
The company has an agreement with U.S. electricity generator DTE Electric Co. to provide 2.5 million tons of coal per year from the Decker mine through the beginning of 2021. The prices under the contract do not allow the miner to recoup the costs to produce the coal at current volumes, Adlard wrote.
"Further, DTE will no longer purchase any coal from the debtors beyond early 2021," Adlard's declaration stated. "As of that date, the debtors will not have a buyer for the coal at the Decker mine."
Lighthouse has sought alternative financing options and assessed a sale of the Decker or Millennium property to a third party but has not been successful. The company's restructuring plan establishes a trust that will create a reclamation plan for the Decker mine. Lighthouse is also establishing a marketing process to sell the Millennium facility. The company plans to retain a land broker to market its Big Horn coal assets, likely as farming and ranching land.
The privately held company reported its workforce included 167 employees before the bankruptcy filing, though it reduced its employee count to 91 on Dec. 2. Its funded debt liabilities total approximately $455.8 million.
Illinois Basin coal producer hits liquidity crunch
White Stallion was founded in 2010 to develop and operate surface mining complexes in Indiana and Illinois. It grew by acquiring coal companies and mines in the region, eventually reaching annual coal sales of 7 million tons and generating $26 million in EBITDA in 2019.
The company operates six surface mines producing thermal coal from the Illinois Basin. Its largest customer is Duke Energy Corp. subsidiary Duke Energy Indiana LLC, which accounted for 70% of the coal company's cash receipts in the nine months leading up to the bankruptcy filing.
White Stallion employed 260 workers but said it terminated all of its employees before the petition date due to "severe liquidity constraints." The company plans to rehire up to 24 employees to carry through the Chapter 11 sale process and service the needs of key customer Duke Energy.
The company reported sustained losses from operations of approximately $14.5 million and a net loss of approximately $30.1 million in 2019.
"The debtors operate in a highly competitive industry, made more competitive by the downturn in the thermal coal market and the shift to natural gas and renewable power generation," White Stallion COO David Beckman wrote in a bankruptcy declaration. He added that the pandemic has exacerbated the decline in coal consumption.
White Stallion received a $10 million loan from the federal Paycheck Protection Program, the majority of which the company believes is eligible for forgiveness, according to the filing.