Walter Coke, a Walter Energy subsidiary that operates a coke plant in Alabama, on Jan. 8 asked its bankuptcy court to let it sign an agreement for sale of coke to an unidentified party.
Walter Coke is one of the Walter Energy subsidiaries in Chapter 11 protection at the U.S. Bankruptcy Court for the Northern District of Alabama. Walter Coke was to be sold to Coal Acquisition LLC, formed by some of Walter Energy’s creditors to buy various Walter Energy assets in Alabama, but Coal Acquisition in December dropped Walter Coke from the to-be-acquired list.
The coke supply agreement provides, among other things, that Walter Coke and its permitted assigns will supply a substantial quantity of coke to the buyer for a multi-year term. “Accordingly, the Supply Agreement is a potentially valuable and marketable asset that increases the value of Walter Coke’s assets as a going concern for the benefit of all interested stakeholders,” the company told the court. “Walter Coke and the Buyer believe that entry into and performance under the Supply Agreement by Walter Coke is an ordinary course transaction. However, out of an abundance of caution, Walter Coke and the Buyer conditioned their entry into the Supply Agreement upon the Bankruptcy Court’s express approval of the Supply Agreement and are seeking such approval through this Motion.”
Walter Coke operates a plant located in Birmingham, Alabama. The plant’s major product line is metallurgical coke, which includes coke baked from coal used for furnace and foundry applications. Foundry coke is marketed to ductile iron pipe plants and foundries producing castings, such as for the automotive and agricultural equipment industries. Furnace coke is sold to the domestic steel industry for producing steel in blast furnaces. The plant utilizes up to 120 coke ovens with a capacity to annually produce up to 400,000 short tons of metallurgical coke.
In August 2015, United States Steel Corp. announced its intent to close its blast furnace and steelmaking operations at its facility in Fairfield, Alabama, which was the largest customer of Walter Coke at the time of the announcement. Since learning of the imminent closure of the Fairfield facility, Walter Coke told the court it has engaged in extensive efforts to identify buyers and markets for its products to replace the business lost as a result of the Fairfield plant closure. Meanwhile, Walter Energy has actively marketed all of Walter Coke’s assets and operations for sale as a going concern.
Walter Coke and the other Walter Energy debtors, with the assistance of their investment banker PJT Partners LP, are actively soliciting offers for other parties to purchase the Walter Coke assets. Walter Coke said it believes that the marketability of its assets will be greatly enhanced by the coke supply agreement, which will provide any buyer with a stable and predictable market for Walter Coke’s production for years to come.
Potential purchasers of Walter Coke’s assets may review the supply agreement after signing a confidentiality agreement. Given the status of the Chapter 11 cases, the supply agreement contains terms that protect the coke buyer’s interest in the event that Walter Coke’s assets are not successfully sold to a third party as part of a timely bankruptcy sale. In particular, the supply agreement provides that it will automatically terminate if Walter Coke ceases business operations or its bankruptcy case is converted to a chapter 7 liquidation case.
The court plans a Jan. 20 expedited hearing on the Walter Coke motion.