Coal giant Murray Energy seeking Chapter 11 protection amidst fundamental U.S. generation shift

Ohio-based coal Murray Energy has filed for Chapter 11 bankruptcy reorganization amidst a fundamental change in coal-fired generation nationwide.

Murray Energy Holdings announced the bankruptcy filing on Tuesday morning. The release noted that it forged an agreement with the lender group which holds more than 60 percent of the approximately $1.7 billion in the company’s superpriority agreement.

The move allows Murray access to liquidity, including approximately $350 million in new debtor-in-possession financing (DIP), according to the report.

“The proceeds of the DIP Facility will be used to refinance borrowings under the Company’s existing ABL credit facility and to support ordinary course operations and payments to employees and suppliers throughout the restructuring process,” the release reads.

Under the restructuring deal, the Ad Hoc Lender Grup will form a new entity to serve as “stalking horse bidder” which would plan to acquire Murray’s assets under a Chapter 11 plan. Meanwhile, Robert Moore will replace Robert Murray as president and CEO of Murray Energy and Murray Energy Corp.

 “We appreciate the support of our lenders for this process, many of whom have been invested with the Company for a long time,” Moore said. “I am confident the DIP Facility provides the Company with adequate liquidity to get payments to our valued trade partners and continue operating in the normal course of business without any anticipated impact to production levels.” Company founder Mr. Robert E. Murray noted, “Although a bankruptcy filing is not an easy decision, it became necessary to access liquidity and best position Murray Energy and its affiliates for the future of our employees and customers and our long term success.”

Voluntary petitions have also been filed for all of the Company’s main operating subsidiaries, including American Energy Corporation, The Harrison County Coal Company, The Marion County Coal Company, The Marshall County Coal Company, The Monongalia County Coal Company, The Ohio County Coal Company, UtahAmerican Energy, Inc., Murray South America, Inc., The Muhlenberg County Coal Company and The Western Kentucky Coal Company, LLC, which operate mining complexes located in Ohio, West Virginia, Utah, Kentucky and Colombia.

Foresight Energy LP and Foresight Energy GP LLC, including their direct and indirect subsidiaries, as well as Murray Metallurgical Coal Holdings, LLC, Murray Eagle Mining, LLC, Murray Alabama Minerals, LLC, Murray Maple Eagle Coal, LLC, Murray Alabama Coal, LLC and Murray Oak Grove, LLC did not file voluntary petitions and are not part of the Company’s Chapter 11 Cases.

Murray is only the latest coal company bankruptcy filing as the resource is reduced in the overall U.S. power generation mix. Other recent coal-related bankruptcies including Cloud Peak Energy and Blackjewel Energy, among others.

Murray was perhaps the biggest so far. It produced about 76 million tons per year and held about three billion tons in reserve.

Coal-fired generation has fallen from more than 35 percent of the U.S. electricity mix to about 27.5 percent in the past few decades, driven down by rising renewable capacity and low natural gas prices.

The U.S. Energy Information Administration forecast that more than 10 GW of coal-fired capacity will either be retired or converted to gas-fired plants this year. Close to 13 GW was retired or converted last year, according to reports.

Developing nations such as India, China, Pakistan and elsewhere, however, are adding coal-fired capacity despite global environmental concerns.

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POWERGEN International will have a Summit track on the Future of Coal-Fired Generation. POWERGEN is happening November 19-21 in New Orleans.

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