This article was originally published by the Ohio Valley Resource.
The convoluted bankruptcy of coal company Blackjewel has hit another turn of events as the company’s former CEO moved to liquidate the company. A federal judge is considering a motion submitted last week to convert the bankruptcy from Chapter 11 to Chapter 7.
That would mean that instead of exiting bankruptcy as a new company with less debt Blackjewel L.L.C. would effectively cease to exist.
Former Blackewel CEO Jeff Hoops, who is currently under investigation for mismanagement of the company, said in a filing that Blackjewel had only $146,000 in unrestricted funds and could not pay millions in back taxes reclamation fees and employee healthcare expenses.
“Given [Blackjewel’s] lack of operating assets, permanent, negative net cash flow, and continuing financial losses, there is no reason to continue this proceeding as a Chapter 11 and incur the substantial and unnecessary administrative expenses attendant to doing so,” Hoops and other filers said in the November 25 motion.
“It’s pretty common for companies to shift from a Chapter 11 to a Chapter 7 when they’re struggling like Blackjewel is,” said University of Chicago School of Law assistant professor Joshua Macey, a coal bankruptcy expert. “Given how long this bankruptcy has dragged on, how poor conditions for coal are right now, how speculative and unprofitable Blackjewel’s assets have been, it isn’t surprising that it’s moving to a liquidation.”
Still Macey said, the move is another recognition by the coal industry’s major players that mining it is rarely profitable.
According to court filings virtually all of Blackjewel’s assets have been sold and the company’s only remaining assets are $146,243 in unrestricted cash and existing claims against Hoops, his wife and children, and a handful of other parties.
Attorneys for Blackjewel attempted to sell Blackjewel’s equipment and mining permits in Kentucky, West Virginia, Virginia and Wyoming soon after the company filed for Chapter 11 bankruptcy protection in July last year. Some permits were successfully sold but others did not sell due in large part to the declining market for “steam” coal which is used to generate electricity. The assets that did sell were recouped for far less than their value: Blackjewel sold an estimated $357 million worth of assets for just $44 million.
Blackjewel accrued $80 million in administrative and other expenses from July 1, 2019 through October 31, 2020.
According to court filings Blackjewel also has multiple outstanding permit violations, an unknown amount of outstanding environmental reclamation liabilities, unpaid taxes totaling $3.2 million, tax liabilities of untold amounts, $14.9 million in unpaid employee healthcare claims, unfunded pension obligations totaling $11.9 million and tens of millions due to the legal teams that have administered the bankruptcy.
It is not clear how much of those debts will be repaid but given the Blackjewel estate’s dire financial straits and the proposed conversion to a Chapter 7 plan, it seems that a significant portion of those debts will not be recovered.
The Chapter 7 petition comes nearly a year and a half after Blackjewel abruptly filed for bankruptcy last July leaving hundreds of Appalachian coal miners out of work and unpaid and spawning one of the largest labor protests in the region in decades.