FM Coal Files For Bankruptcy

Sep 2, 2020

Top three list of unsecured creditors
Credit United States Bankruptcy Court for the Northern District Of Alabama

A company whose ownership was once affiliated with Wyoming mines has filed for Chapter 11 bankruptcy. Alabama-based FM Coal cited consistently reduced revenue and lack of capital investment.

FM Coal's sole owner Michael Costello was an original owner and officer of Eagle Specialty Materials (ESM), created to operate Blackjewel's western assets including the Belle Ayr and Eagle Butte mines in the Powder River Basin. ESM is now under seperate ownership. The two firms were never legally affiliated.

ESM nor Wyoming are mentioned in the company's bankruptcy declaration. ESM is mentioned only as an unsecured lender of $2.78 million; unsecured means it's more difficult to get that money back than if the company was a secured lender. 

Campbell County lists ESM as the taxpayer for the two mines and says the company is currently up-to-date. The two mines are also bonded by third-party surety companies.

Energy economist Rob Godby said the bankruptcies' most significant impact could be on investor's thinking.

"You can see that creditors may think twice about offering liquidity and capital and credit to ESM and that's something really to worry about," he said. "Because what people forget is that mining, especially in the Powder River Basin, is capital intensive and requires that financial reinvestment to not only operate efficiently, but to operate safely and to be cost competitive."

Godby added banks and lending institutions are generally more wary of companies that are not publicly-traded given that there's less access to financial information.

FM Coal's largest unsecured lender was through the Paycheck Protection Program for $3.58 million.

A West Virginia court approved ESM as the buyer of Eagle Butte and Belle Ayr in October of 2019.

Have a question about this story? Please contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.

Correction 09/04/20: A previous version of the story incorrectly called FM Coal the parent company of ESM, when in fact the two companies are under seperate ownership. FM Coal owner Michael Costello was also an owner of Eagle Specialty Materials, but there was no legal affiliation between the two companies.