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Despite buzz in met coal, Mission Coal files for bankruptcy after legal issues

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Despite buzz in met coal, Mission Coal files for bankruptcy after legal issues

Mission Coal Co. LLC filed for Chapter 11 bankruptcy protection Oct. 14, just days after reaching a settlement with a coal company owned by the family of West Virginia Gov. Jim Justice in a case it had previously warned could lead to bankruptcy.

Mission reported between $1 million and $10 million in estimated assets, with estimated liabilities of between $100 million and $500 million, in a petition filed with the U.S. Bankruptcy Court for the Northern District of Alabama. The Tennessee-headquartered company and its affiliates were established through a series of acquisitions made at a time when many other companies were struggling with their own bankruptcy reorganizations or financial hardship. Mission has complexes in West Virginia and Alabama and primarily mines metallurgical coal used to make steel.

Earlier in the month, it was reported that Mission subsidiary Seneca Coal Resources LLC was idling its Pinnacle coal mine in West Virginia controlled by affiliate ERP Compliant Fuels and was expected to permanently close the mine soon and lay off 359 workers. The Wyoming County mine produced 1.2 million tons of coal in 2017, according to the U.S. Mine Safety and Health Administration.

The petition listed 10 affiliates of Mission Coal that also filed for Chapter 11 relief Oct. 14, including Beard Pinnacle LLC, Pinnacle Mining Co. LLC, Seminole Coal Resources LLC and Seneca.

Bluestone Coal Corp., a company owned by Justice's family, sued Seneca subsidiary Pinnacle Mining in 2016, alleging a borehole Pinnacle drilled had flooded Bluestone's nearby Double-Bonus mine. Pinnacle said in July that a $600 million claim Bluestone was seeking would immediately bankrupt the company.

The two companies worked out a settlement with previously undisclosed terms Oct. 3. In an Oct. 15 emergency filing to reopen the case, Bluestone said the terms of the agreement included $4.0 million to be paid by Seneca along with $8.15 million from Cleveland-Cliffs Inc. and several insurance carriers. Cleveland-Cliffs sold the mine to Seneca in 2015.

Another "essential term" of the agreement provided for Seneca transferring leasehold or real property interests and permits associated with about 33,000 acres in the Pocahontas 4 coal seam in McDowell and Wyoming counties in West Virginia.

Apparently unaware that Seneca had already filed a bankruptcy petition, Bluestone filed the Oct. 15 emergency motion warning that Seneca advised it could file for bankruptcy as early as the same day. Bluestone asked the court for a written order that the settlement agreement legally and equitably conveyed the Pocahontas 4 coal seam property Oct. 3, though recording and necessary documentation continued after that date. Later in the day, Bluestone withdrew the motion as litigation against a debtor is subject to an automatic stay under U.S. bankruptcy laws.

Justice called the closing of Pinnacle "not so good news" in an Oct. 12 statement released through the governor's office. The governor said he was "directly involved" and had asked the state's Commerce Department to get involved in the "biggest way they possibly can to try to figure out every way and any way that we can get these miners back to work either at that mine or at another mine close by."

"We're very hopeful that the mine has not seen its last days," Justice said.

Some of the largest claims from creditors against Mission Coal include litigation-related claims of $4.9 million owed to an individual and $4.0 million owed to Bluestone. The largest is an unsecured claim of $9.7 million held by the trustees of the United Mine Workers of America Pension & Benefit fund. Seneca also reported a $3.2 million trade claim held by Natural Resource Partners LP.

Mission appointed Kevin Nystrom of Zolfo Cooper LLC, a restructuring and financial management company retained to represent Mission in its bankruptcy, to the role of chief restructuring officer. Despite recent reports that coal companies are successfully marketing coal abroad, Mission joins Westmoreland Coal Co. as the second U.S.-based coal miner to file for bankruptcy reorganization in October.