What It Will Take To Reopen Blackjewel Mines

Jul 11, 2019

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Blackjewel has yet to publicly announce any plans to reopen the gates at Eagle Butte or Belle Ayr mines this week. That would require a hearing to confirm long-term debtor-in-posession (DIP) financing - an elusive prospect for a company that's struggled to secure much cash in court.

A hearing set for Friday, July 12, in West Virginia seeks to continue insurance coverage, authorize payment of prepetition taxes and allow the company to hold onto utilities.

Right now, Blackjewel is surviving on $5 million in short-term DIP funding. That came from Riverstone Credit Partners last week after the West Viriginia court turned down a $20 million package. The money funded a skeleton crew to secure the mines' safety. But Clarke Williams-Derry, Sightline Institute director of energy finance, said the $5 million could run out anytime and that "some of the filings, professional fees alone will eat into that."

Rob Godby, University of Wyoming energy economist, said creditors are certainly negotiating a longer-term money plan behind the scenes and they're not blind to the time crunch.

"They're working against the clock, which may force people to come to an agreement soon." Godby said, "but obviously the money could run out."

Godby explained it's not easy to come up with a long-term package. Any creditor could object in front of the judge and put an end to it. He described a long-term DIP package like a game of poker, where each creditor wants to be in the best position to collect on its debt.

Both analysts agree, the longer the creditors take to introduce a package, the worse off they and the company will be. Godby explained the more time passes, the more expensive it will be to re-open the mines and pay back lost wages. There's also potential damage done to market share and customers, it's harder to find credit, and it's a riskier investment.

With that in mind, Godby said a long-term plan is likely to come in front of the West Virginia judge very soon.