Once one of the nation’s largest coal producers, Gillette-based Cloud Peak Energy Inc. has cleared a major hurdle that brings the company closer to emerging from Chapter 11 bankruptcy reorganization.
A U.S. Bankruptcy Court judge approved the company’s disclosure statement Thursday, an important step in a legal process that still leaves many unresolved issues. Those include Navajo Transitional Energy Co., which bought Cloud Peak’s three operational Powder River Basin coal mines, assuming more than $400 million worth of reclamation obligations.
NTEC bought Cloud Peak’s most valuable assets – the Antelope and Cordero Rojo mines in southern Campbell County and Spring Creek mine in Montana – in August and has been operating the mines since October. So far, the Navajo Nation-backed company hasn’t made any significant changes to a workforce of more than 1,200 at the three mines.
As part of the deal, NTEC agreed to assume about $94 million worth of Cloud Peak’s more than $400 million debt. That includes a $15.7 million deposit paid upon the sale’s closing and assuming a $40 million second lien promissory note. NTEC also agreed to cover Cloud Peak’s debts accrued during the bankruptcy process up to $20 million.
Important to state and local governments was NTEC also assuming all of Cloud Peak’s unpaid federal, state and local tax liabilities, including $8.3 million that was due to Campbell County on the same day the company filed for bankruptcy, May 10. The deal also guarantees production taxes will continue to be paid on schedule going forward.
Based in Farmington, New Mexico, Navajo Transitional Energy Co. owns the Navajo Mine in the Four Corners area and is organized under the Navajo Nation.
During the auction process, one of the strongest selling points in NTEC’s favor was its assumption that the Navajo Nation would financially guarantee nearly $400 million in reclamation obligations attached to the mines.
Last month, the tribe decided not to back the purchase of the mines, which means NTEC will have to find third-party bonding to guarantee reclamation before it can be granted a permit. NTEC has said it’s confident it can satisfy the reclamation burden, but until then the bonding secured by Cloud Peak Energy remain in effect.
See Friday’s News Record for more on this story.