The bankruptcy case involving coal firm Blackjewel will stretch into the new year, after a federal judge blocked a request from the former CEO and coal magnate Jeff Hoops to liquidate the company this month. This means the case will proceed as a Chapter 11 reorganization case, but an exit plan has yet to be approved by the court.
Another hearing will take place in January instead.
The events of the latest hearing held Thursday mark yet another twist in the over 18-month long bankruptcy case that captured the attention of the nation last year.
Blackjewel formerly owned the Eagle Butte and Belle Ayr mines in Wyoming before falling into debt and declaring bankruptcy in the summer of 2019. The coal operator also shuttered several mines out East at the same time. Nearly 1,700 miners were shut out of work for months.
A new owner, Eagle Specialty Materials, now operates the Wyoming mines. But Blackjewel’s contentious legacy and unresolved bankruptcy continues to weigh on the new operator, not to mention creditors, regulators and miners.
In a sign the bankruptcy case was approaching a resolution, Blackjewel attorneys presented a plan for exiting Chapter 11 bankruptcy in October.
A bankrupt company must have a formal plan approved by the court before a bankruptcy can conclude. The plan typically outlines how the company will settle creditors’ claims and tie up other lose ends.
But Hoops, Blackjewel’s former CEO, petitioned the court in an 11th-hour request to liquidate the company instead of reorganizing it.
In other words, Hoops and seven other parties filed a joint motion on Nov. 25, requesting the U.S. Bankruptcy Court for the Southern District of West Virginia convert the case to Chapter 7. They cited Blackjewel’s “lack of operating assets, negative net cash flow, and continuing financial losses,” according to the motion.
Blackjewel reported having a mere $133,000 in cash remaining, according to court documents, as of Nov. 30.
But Judge Benjamin Kahn denied Hoops’ motion on Thursday.
Ultimately, the case’s designation may not make a significant difference in the outcome. In a Chapter 11 bankruptcy, a company sheds debt and restructures with the goal of continuing to operate. In a Chapter 7, a company will liquidate by selling or abandoning its assets to pay back creditors until it ceases to exist.
In the end, Blackjewel will likely have minimal cash to distribute to the hundreds of creditors it owes money to. Though attorneys for Blackjewel held sales for the company’s 32 coal mines across the country during the summer of 2019, the winning bids were limited and some mines didn’t sell.
Still, an exit plan has yet to be approved by the judge and the court will reconvene for another hearing at 7:30 a.m. on Jan. 15.
Meanwhile, the new owner of the two Wyoming coal mines formerly owned by Blackjewel has yet to obtain the federal leases associated with the mine sites, along with eight leases for coal sites out east.
The U.S. Interior Department extended the deadline for Eagle Specialty Materials to assume or reject the leases to March 31, according to court documents filed on Monday.
A spokesman for Eagle Specialty Materials did not return a request for comment.
When Blackjewel filed for Chapter 11 bankruptcy in 2019, it owed the Interior Department over $50 million in royalty payments and additional fees for extracting coal at the Belle Ayr and Eagle Butte mines.
Though Eagle Specialty Materials has since taken over all operations at the mines, the federal government — and consequently American taxpayers — has yet to be paid.
According to a court order, Eagle Specialty Materials will be liable for all royalty payments associated with the pair of Powder River Basin coal mines for the period after Oct. 18, the date the company began operating the mines. It remains unclear who will be responsible for the over $50 million in delinquent royalty payments racked up by Blackjewel before and shortly after the bankruptcy began.
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