CanAm Coal Corp. said May 28 that its Alabama-based coal mining subsidiaries – Birmingham Coal & Coke (BCC), Cahaba Contracting & Reclamation LLC (CCR) and RAC Mining LLC (RAC) – have filed voluntary petitions under Chapter 11 at the U.S. Bankruptcy Court for the Northern District of Alabama.
The Alabama subsidiaries have mineral reserves, mining operations, coal properties and long term off-take contracts with customers in the northwestern region of Alabama. During the restructuring, they will operate its businesses, continue customer shipments, continue to honor its obligations to its landowners and will continue to pay its employees in the normal course, CanAm said.
“Over the past several years, the coal markets in the U.S. have faced a number of significant challenges, including increased environmental regulations and reductions in demand due to weaknesses in the U.S. and global economy and lower natural gas prices. This environment has created an extremely challenging financing environment as the Company attempted to refinance its existing debt obligations,” said Jos De Smedt, CanAm’s Chief Executive Officer. “Additionally, weakness in the local thermal coal market in the fourth quarter of 2014 and the first quarter of 2015, combined with a cold and extremely wet winter that impacted the mining and shipment of coal, has continued to erode CanAm’s cash position.”
CanAm said it plans to use the Chapter 11 process to undertake a financial restructuring and create a strong financial foundation for the company’s future.
“After careful consideration of all available alternatives, the boards of the respective companies determined that a Chapter 11 filing was a necessary and prudent step and the best way to maintain regular operations and allow for a successful restructuring,” said Robert Lewis, President of CanAm, BCC and CCR.
Jones Walker LLP is serving as legal counsel for the Alabama subsidiaries and Borden Ladner Gervais LLP is serving as Canadian counsel for CanAm, which is based in Canada.
CanAm also reported that it has received a notice of default from Christian & Small Attorneys, who are representing certain holders of the company’s 9.5% Unsecured 2016 Debentures and 12% Secured 2018 Debentures (collectively referred to as the “Debentures”). In accordance with the terms of the Debentures, the entire principal of all Debentures becomes immediately due and payable upon default. CanAm is currently reviewing the notice of default. In addition, it has received a demand for payment notice for an outstanding related party loan in the amount of $750,000 that was advanced on Nov. 5, 2014. The company said it s currently reviewing the notice of demand for payment.
The company’s key assets in northern Alabama include four producing mines (Knight, Posey Mill II, Old Union II, and Powhatan) as well as two mines under development (Gooden Creek II and Huggins). CanAm Coal entered the coal mining business in 2009 with the creation of an Alabama-based company, RAC Mining. In the third calendar quarter of 2014, the last quarter for which the company has reported figures, coal sales for the quarter were 170,000 tons as compared to 196,000 tons in the year-ago period.