Some of the largest coal companies in the U.S. have paid out at least $138.7 million in professional fees to restructure their balance sheets or sell off assets.
According to S&P Capital IQ data, $138.7 million is the total amount of fees spent in seven of the dozens of bankruptcies that have rocked the industry since 2012. The total is as reported as of April 7 and includes fees paid to accountants, financial advisers, legal advisers, workout specialists and crisis managers.
With some advisers charging well over $1,000 per hour, several firms won multimillion-dollar contracts to guide key players in the coal industry through the bankruptcy process.
The bulk of those fees went to legal and financial advisers, who billed about $83.2 million and $40.1 million, respectively, in the analyzed coal bankruptcies. Accountants billed about $8.7 million for the seven bankruptcy cases so far, and workout specialists/crisis managers accounted for about $6.7 million of the total.
The Government Accountability Office published a study in 2015 pointing to concerns about the amounts charged to distressed companies in large bankruptcies. The study found "mixed views" across its survey of bankruptcy professionals, judges and stakeholders on the efficacy of the U.S. Trustee Program's fee guidelines.
With the recent emergence of Peabody Energy Corp., the largest U.S. coal companies to face bankruptcy have now put their reorganizations behind them. Of the seven bankruptcies examined, Peabody and Arch Coal Inc. are the only two to return to the market with substantially the same operational footprint. Patriot Coal Corp. and Walter Energy Inc. assets were sold during their recent Chapter 11 bankruptcy proceedings. Alpha Natural Resources Inc. is a much smaller coal company, with much of its top assets going into its bankruptcy spinout Contura Energy, Inc.
The companies have been plagued by falling demand for coal in the U.S., but also suffered a steep decline in metallurgical prices. Many large coal companies took on large debt loads to become players in the met coal market when prices were soaring, only to find the debt too much to bear when the rest of the industry took a downward turn.
Walter Energy, which primarily produced metallurgical coal, reported the highest total for bankruptcy fees among coal companies to date. The company reported it has been billed $39.7 million in total adviser fees through its bankruptcy.
Meanwhile, Warrior Met Coal LLC, the producer that bought Walter's core assets, is debuting an initial public offering and has been hosting job fairs to bring Alabama miners back to work.
Peabody Energy reported about $31.0 million in bankruptcy fees so far. The company has shed about $5 billion in debt in the restructuring process and plans to succeed as the "only global pure-play coal investment."
Fees charged to a company in bankruptcy must be approved by the court.