Alpha Natural Resources exits bankruptcy with $292.7 million in clean-up obligations
By Tom Hals and Tracy Rucinski
WILMINGTON, Del., July 26 (Reuters) – Coal producer Alpha Natural Resources Inc emerged from Chapter 11 bankruptcy on Tuesday with doubts about its long-term prospects and ability to carry out a recent environmental clean-up deal with regulators.
Alpha said in a statement it emerged from bankruptcy as a slimmed down, privately held company with operations in West Virginia and Kentucky. The company filed for bankruptcy about a year ago as the fourth-largest U.S. coal producer.
The company struck an agreement earlier this month that it said would provide about $400 million over a decade for cleaning up mining sites and polluted streams. In return, government regulators withdrew their opposition to the company’s bankruptcy exit plan.
Newly appointed Chief Executive Officer David Stetson said in a statement on Tuesday that the company had a solid financial foundation and was better positioned to meet its clean-up obligations.
However, a U.S. government lawyer said at a July 7 U.S. Bankruptcy Court hearing in Virginia that some authorities had concerns about Alpha’s ability to fund the agreement over the long term, concerns echoed by a credit analyst at the Cowen Group Inc financial firm.
“The feasibility of the reorganized company is in question from day one. The base case for the reorganized company is bankruptcy,” said Amer Tiwana.
The government lawyer told the U.S. Bankruptcy Court that regulators agreed to the deal because they feared that without it, Alpha might end up liquidating and walking away from its clean-up obligations.
Alpha had benefited from an industry subsidy which allows the largest mining companies to extract coal without setting aside cash to ensure the company will restore the land to its natural setting, as required.
Smaller mining companies have to set aside cash, collateral or a surety bond to obtain permission to begin mining, which can leave behind impoundment ponds filled with toxic sludge.
Alpha, along with other big miners including Arch Coal and Peabody Energy, which are in bankruptcy, have been able to self-bond, or essentially use their financial strength as a promise to perform mine clean-ups.
Under its deal with the government, Alpha exits bankruptcy with $292.7 million in clean-up obligations.
Alpha’s lenders acquired its mines in Wyoming in return for forgiving some of what they were owed, and the company also auctioned its natural gas assets. (Reporting by Tom Hals in Wilmington, Delaware)