Blackjewel LLC may be closer to selling its flagship Eagle Butte and Belle Ayr mines in Campbell County than it is to securing financing to reopen and resume operations at its more than 30 operations in Wyoming, Kentucky, Virginia and West Virginia.
That was part of the information gleaned from a Friday hearing in U.S. Bankruptcy Court for the Southern District of West Virginia in which Blackjewel asked the court to approve another $2.9 million loan to tide the company over through Monday.
The money, which was approved, is in addition to $3 million in emergency funding the company has already spent to pay a skeleton crew of employees to provide security and other necessary maintenance at Blackjewel’s mine sites.
The $2.9 million approved Friday will be used to pay Blackjewel’s health insurance and workers’ compensation premiums, which were due Friday, said Stephen Lerner, a Cincinnati, Ohio-based attorney representing the company.
That money brings the total amount borrowed to $5.9 million.
Lerner said the goal is still to negotiate a financing package that will allow Blackjewel to take it through Chapter 11 bankruptcy and reopen its mines, which have been closed since July 1 when $20 million in financing was pulled by United Bank. That prompted the company to lock out its 1,700 employees, including about 600 at the Wyoming mines.
Lerner said the money approved Friday is a “bridge that will enable us to get through today through Monday” and that Blackjewel officials “continue to try to find a reasonable path forward” and have been “working day and night” toward that goal.
While he didn’t object to the loan, a lawyer for Riverstone Credit Partners, one of Blackjewel’s secured debt holders, wondered if it wouldn’t just be prolonging the inevitable.
“We’re concerned this loan is a bridge to nowhere,” said Kevin W. Barrett. “What this is really doing is simply buying time. We’re talking about buying a day or two or three. … We do not object to the … financing, but we do have our reservations about it.”
Also expressing reservations was federal bankruptcy Judge Frank W. Volk, who said that although his scope in making a decision was limited the loan, he said he wanted answers to some questions many of Blackjewel’s locked out employees have been asking.
“The court is concerned about the employees,” he said. “Where do they fall in the scheme in respect to recoveries in this case?”
In response to Volk’s questioning, Lerner outlined that Blackjewel owes more than $15 million in unpaid wages, 401(k) contributions and payroll taxes to its employees in the east and Wyoming. In the east, where workers had their June 28 payroll checks bounce when the initial bankruptcy financing was pulled, the company owes nearly $11.8 million in payroll and taxes and another $1.2 million in employee 401(k) contributions. For Belle Ayr and Eagle Butte employees, it’s $1.5 million in wages and taxes and $900,000 for their 401(k) accounts.
Judge Volk also questioned the Blackjewel attorneys more about the disparity between the company’s eastern and western operations and if the process was manipulated to favor the Wyoming mines, which are larger, more profitable and more attractive to potential buyers. He specifically asked if the Wyoming employees got an extra paycheck to make it more likely they’d return whenever the mines reopen.
“When I heard the disparities, it’s a question I need to ask, for sure,” Volk said.
Lerner said he’s “not aware of any efforts” on the part of Blackjewel throughout the bankruptcy process “other than to bring them all back.”
Sell or operate?
Also during Friday’s hearing, Lerner said that as Blackjewel has worked to secure financing to reopen and operate its mines, that hasn’t been successful and the company is open to other avenues, including selling all or some of its assets.
In particular, he said the Belle Ayr and Eagle Butte mines are clearly the most valuable assets and would be most sought after through a sale. Also, if Blackjewel can’t obtain financing to reopen all of its mines, it might be more attractive to lenders to loan money to reopen the Wyoming mines only because they could provide the company with needed cashflow.
“The west (operations), if we’re able to obtain some additional financing up front, we’ll be able to return them to (a point) to generate cash flow until they can be sold,” Lerner said. “There are challenges to making the east more profitable.”
With the extra time provided by Friday’s loan, the hope is Blackjewel can still negotiate a deal, Lerner said.
He also said that lenders so far have shown more interest in the Campbell County mines than the company as a whole.
“These lenders have focused primarily on financing the western operations,” he said.
The judge asked what has changed in the past couple of weeks when Blackjewel’s state main goal to the court was to reopen all of its mines and reorganize under Chapter 11 to now, when the goal seems to be a sale.
“There was an expectation (when the company secured its emergency funding) it would resuscitate operations in the west and east. Then (employees) would be called back and made whole then,” Volk said. “Do you plan to return the properties to full production in advance of a sale?”
Lerner said that’s the preferred outcome, but the west and east divisions of the company are “very different” and may need to be dealt with on their own.
“It’s more likely there will not be a buyer for all the assets,” he said. “It’s also possible that some assets will not be capable of being sold. … The east poses challenges that just aren’t (there) in the west.”
That doesn’t seem to be the case with Belle Ayr and Eagle Butte, he said, as the company has had some inquiries about the mines. That includes potential lenders for its bankruptcy funding, who so far “have focused primarily on financing the western operations.”
That may mean the 1,100 employees in the east could be out of work for longer or permanently, Lerner said, which “just may be the reality of the circumstance.”