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Coal company claims bank did not allow it to make loan payments

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Coal company claims bank did not allow it to make loan payments

A West Virginia-based coal company accused of failing to make payments on its loans and fraudulently transferring assets to make a deal for two large Powder River Basin coal mines asked the court for relief because it paid when times were tough for the industry and received no response to attempts to change its payment plans for a fifth time.

Fifth Third Bank sued Revelation Energy LLC in the U.S. District Court for the Southern District of West Virginia earlier in the year based on claims the company failed to make payments on loans for $20 million and $5.2 million. The bank alleged Revelation owed the bank more than $6.9 million in principal and conveyed assets believed to be collateral for the loan to its Wyoming coal mining affiliate, Blackjewel LLC. In a May 21 court filing, Revelation said it had come to rely on the "receptiveness and responsiveness" of the bank to help it repay the loan without defaulting, but that communication stopped in late 2017.

The demand for immediate payment of the loan, Revelation wrote, will "cripple" the coal company to the degree that its "future business endeavors are uncertain."

"Through the life of the loan, and in a very tumultuous time in the coal industry, when many coal companies were declaring for bankruptcy protection, Revelation Energy repaid [$19.3 million] of the loan amount," the company wrote. "To this date, Revelation has not declared bankruptcy and has been making payments, even on the amount at issue in this litigation, which have been accepted by Fifth Third Bank."

Blackjewel acquired the Eagle Butte and Belle Ayr mines from Contura Energy Inc. in late 2017. The transaction was Blackjewel CEO Jeff Hoops' first foray into the Powder River Basin after a series of eastern U.S. coal acquisitions. According to Contura's fourth-quarter earnings report, the company paid Blackjewel $21.4 million in exchange for taking on certain liabilities and transaction costs.

Revelation's filing said the company had made phone calls seeking to make interest-only payments or other alternative repayments to the bank.

The coal company wrote that the "sudden change in course of dealings" — communications between the two parties by phone — prevented Revelation from complying with terms of its loan. Because it had become accustomed to successfully arranging alternative repayment means on four other occasions, it claims the bank breached its loan contract by allegedly failing to respond.

Revelation also claims Fifth Third's suit is based on erroneous assumptions, including what it said was a "completely false" claim that collateral securing the loan was transferred to Blackjewel.

In a counterclaim, Revelation alleges the bank is guilty of fraud because it "never intended to allow Revelation to make its repayments" in what it called "an apparent attempt to generate fees and costs, or some other more nefarious act such as harming a coal company."

In prior filings, Fifth Third has written that it believes Revelation and its holding company are "materially failing to effectively manage their businesses, affairs and cash flow to the detriment of themselves and their creditors, including the bank." Responding to the company's motion to dismiss the lawsuit, Fifth Third wrote in a filing that there is no doctrine of law providing a cause of action even if Fifth Third did ignore attempts to request a fifth extension of Revelation's loan repayments.

"The counterclaims interposed by Revelation in this case have no basis whatsoever in fact or law and should be dismissed with prejudice. ... Fifth Third was under no obligation to grant even the first extension, and certainly was not obligated to grant a fifth extension," the bank wrote.