Alpha Natural Resources emerged from bankruptcy Tuesday, following the approval of a restructuring plan for the coal company on July 6 that was widely considered a victory.
Alpha, which filed for bankruptcy in August 2015, was the first of three large coal companies operating in Wyoming to seek Chapter 11 protection in the last year, when the coal industry faced three-decade lows.
A federal judge approved the firm’s plan to split into two companies, set aside $13 million to fund 4,580 former employees’ health benefits and end self-bonding in its Wyoming mines.
Alpha has $411 million in self-bonds in Wyoming, which under the agreement will be replaced with secured financing. The practice of self-bonding, wherein a company bets its assets against the eventual cost of cleanup, is hotly contested by environmentalists.
The Alpha deal was partially brokered by the Department of the Interior, which threatened to block the transfer of federal mining leases if the self-bonds were not replaced.
Some hope that Alpha’s story will set a precedent in self-bonding in Wyoming for Arch Coal and Peabody Energy. The bankrupt companies have not had emergence plans approved. Together they have $1.2 billion in self-bonds in Wyoming.
The new Alpha will operate 18 mines and eight preparation plants in Appalachia, while a newly formed company, Contura Energy, will continue the more lucrative operations in Wyoming. Contura is owned by Alpha’s senior lenders.
Analysts have questioned the viability of Alpha’s Appalachian company going forward. The newly emerged company will have limited cash flow despite heavy reclamation obligations.
The same is not being said of Contura, which despite a projection of tight liquidity in the next few years inherits the best of Alpha’s assets and the least of its cleanup obligations.