- The declining coal sector has claimed another victim, with Westmoreland Coal announcing on Tuesday that it was filing for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas.
- The company has $1.4 billion in debt, and said it had reached a restructuring support agreement with a group of lenders holding a majority of its loans. Company officials said Westmoreland has launched a business transformation initiative aimed at increasing cash flow by identifying savings from "operational, commercial and overhead efficiencies."
- Westmoreland was incorporated more than 150 years ago, but the decline in demand for coal has been a challenge for many big names. Also filing for bankruptcy in the last few years years are Peabody Energy, Arch Coal and Alpha Natural Resources.
Westmoreland's decision to file for bankruptcy highlights the tight margins the coal industry is dealing with today. The supplier's bankruptcy announcement comes just days after American Electric Power revealed it would shutter its 1,590 MW Conesville coal generation facility in Ohio — the plant is a major customer of Westmoreland's, according to S&P Global.
While Westmoreland's difficulties come amid a broad downturn for the coal sector and the continuing shutdown of coal-fired plants, the company's leadership remains confident.
The decision followed "months of thoughtful and productive conversations with our creditors," and the company's goal is to emerge stronger and "better positioned to grow and thrive," Westmoreland interim CEO Michael Hutchinson said in a statement.
The agreement with lenders also addresses Westmoreland’s liabilities, including funded debt and other obligations. Both Westmoreland and Westmoreland Master Limited Partnership have filed motions with the bankruptcy court that will allow the companies to continue day-to-day operations, including payment of employee wages and benefits and payment to key trade creditors for goods and services.
Under the restructuring support agreement, Westmoreland said the lender group "agreed to act as a stalking horse bidder to acquire substantially all of Westmoreland’s business assets." Separately, the company said, Westmoreland Master Limited Partnership will continue its planned sale process.
Also under the restructuring agreement, $90 million of outstanding debt under the company’s existing $110 million bridge loan facility will be refinanced with a new debtor-in-possession facility, subject to bankruptcy court approval.
Westmoreland said it expects the debtor-in-possession financing and cash flow from operations to provide "adequate liquidity" to support Westmoreland’s U.S. and Canadian business throughout the restructuring process. However, Westmoreland said its Canadian entities and Westmoreland Risk Management are excluded from the voluntary petitions for Chapter 11 protection.
Sierra Club commented on the announcement, saying Westmoreland’s bankruptcy "has been anticipated over the past year," as power plants retired and demand for coal declined.
The Chapter 11 filing is "the latest clear signal that the coal industry is in an irreversible decline. ... Nothing can stop America’s shift away from coal and toward clean energy," Mary Anne Hitt, senior director of Sierra Club’s Beyond Coal campaign, said in a statement.