Dallas, Texas 07/16/2015 (Financialstrend) – Walter Energy, Inc. (OTCMKTS:WLTG) is to be managed by creditors as part of the bankruptcy protection agreement. The restructuring provides the company with an opportunity to establish a sustainable capital structure as well as initiate some changes to its operational cost drivers.
Walter Energy, Inc. (OTCMKTS:WLTG) will have to wipe out its junior creditors as well as reduce labor costs and pension costs as part of the restructuring plan. The company in a statement maintains it has sufficient cash to pay vendors and suppliers for any goods and services supplied during the reorganization period.
The restructuring plan will allow all senior lenders to convert all their debt into equity with the establishment of a timeline for confirmation of Chapter 11. Should Walter Energy, Inc. (OTCMKTS:WLTG) fail to meet all the set out conditions under chapter 11, a sell of its assets under a court-supervised auction process is to follow suit.
Consequences of Low Coal Prices
The coal miner cash balance has been battered as coal prices hit all-time lows immensely affecting its liquidity levels. Coal prices are down to less than a $100 a ton compared to highs of $300 a ton four years ago as it remains unclear whether prices will ever pick. The company has also been hit hard by crippling legacy labor costs in the form of increased medical benefits as well as high pension obligations.
The filing of the bankruptcy motion is a cautionary move that allows Walter Energy, Inc. (OTCMKTS:WLTG) to continue its operations under a new operating structure. The filling also gives the company an opportunity to continue using its bank accounts to pay its vendors as well as its 2,300 staff. Most of the employees are under the United Mine Workers of the America Union which says it is working Walter Energy, Inc. (OTCMKTS:WLTG) to ensure their rights are protected throughout the restructuring process