Wyoming News Exchange

Judge denies Blackjewel’s last-ditch financing effort
 
By Greg Johnson
Gillette News Record
Via Wyoming News Exchange
 
GILLETTE — That collective sigh you may have heard Wednesday morning was from 580 Campbell County coal miners learning they may be out of jobs permanently.
After a marathon five-and-a-half-hour emergency hearing Tuesday, a federal bankruptcy court judge has ruled against a Blackjewel LLC proposal that would provide financing for its mines while it reorganizes under Chapter 11. Instead, the company may be out of options that keeps its doors open and mines operating.
In his ruling against Blackjewel and President and CEO Jeff Hoops Sr., Judge Frank W. Volk said “the circumstances of this rapidly unfolding case … is unlike any I have ever seen or read about or taught about.”
The hearing was a last-ditch attempt to salvage Blackjewel’s Monday morning Chapter 11 filing after being denied a $20 million line of credit to keep its coal operations running. That includes the Belle Ayr and Eagle Butte mines in Campbell County, the fourth and sixth largest producing thermal coal mines in the United States at a combined 35.5 million tons in 2018.
Hoops offered to front financing to keep the bankrupt coal mining operations running if his money is secured as senior priority to be paid back during Chapter 11 bankruptcy proceedings.
Without immediate court approval, Blackjewel may “have no choice but to convert these cases to Chapter 7,” says a motion filed Tuesday afternoon with the U.S. Bankruptcy Court for the Southern District of West Virginia.
Instead of a reorganization, Chapter 7 is a straight liquidation of a business.
“If that occurs, untold amounts of value of (Blackjewel’s) assets and estates will be destroyed and more than 1,700 people will be out of work,” the motion says. “It is imperative that the revised financing proposal be heard today, if at all possible, if the Debtors are to continue as a going concern.”
It wasn’t known at press time if Blackjewel would file for Chapter 7 or pursue other financing options. A call to Hoops went straight to voicemail.
On pins and needles
For about 20 hours, from the time Tuesday’s hearing began and the ruling was released Wednesday, Chris Pilcher spent his time like many of his Campbell County Blackjewel co-workers: constantly hitting “refresh” on his web browser to learn if he’d be called back to work.
“It’s rough, I’ll be honest with you,” said Pilcher, an Eagle Butte coal mine worker who was abruptly locked out with about 580 other Blackjewel employees Monday afternoon. “I’ve been checking on social media constantly and with family and friends. It’s nerve-wracking, really nerve-wracking.”
Pilcher and his co-workers were waiting on pins and needles to learn if they’d still have jobs by the end of the day Wednesday.
The motion was a day removed from Blackjewel LLC first filing for Chapter 11 bankruptcy protection, then hours later abruptly shutting down operations and locking out miners when emergency funding was unavailable.
Knowing that their jobs depended on the motion’s approval, not many locked out workers got much sleep Tuesday night, Pilcher said.
Upon learning of the judge’s ruling, he sounded crestfallen.
“I don’t even have any words for it,” he said. “My heart just dropped, that’s for sure.”
“I know I was up until about 11 or so last night just checking and checking, Googling ‘Blackjewel mining news’ to see if there was any news, then again at about 6 this morning,” he said.
Pilcher said he can’t imagine not having those mines operating.
“It would help out a lot of families if we could go back to work,” he said, adding his brother also works alongside him at the Eagle Butte mine. “I honestly hope we all go back to work, even though for me I’m just going to fill out my two-week notice. But there are 600 families I don’t want anything bad to happen to.”
Pilcher has 10 years in the oil field and 10 years as a coal miner and said he’s been through a layoff before.
“Back in 2008 in the oil and gas field, I lost my job and almost lost my house then,” he said. “That’s when I went to the coal mines and thought things were stable there — until 2016, then it’s been uncertain since.”
A messy situation
Monday’s lockout essentially put 580 mine workers out of jobs, but there aren’t many similarities to the situation that happened March 31 and April 1, 2016, when a combined 500 Arch Coal and Peabody Energy employees were laid off, said Rob Godby, director of the Center for Energy, Economics and Public Policy at the University of Wyoming.
“Well, yes, this has been pretty messy with the worst possible outcome,” he said. “There was no warning and happened without a smooth shutdown.
“The thing was in 2016, people were just out of work. You didn’t have a company walk away from a bunch of invoices (owed to contractors). This time, it just came out of the blue. ‘Messy’ would be the right word.”
Blackjewel’s bankruptcy filing also shows a precarious financial model where it was juggling money to pay the most pressing bills at its various properties in Wyoming and the eastern United States. Along with a practice in the Powder River Basin properties of selling coal at a loss to generate cash, it wasn’t sustainable, Godby said.
“This suggests (Blackjewel) was willing to operate at a loss, robbing Peter to pay Paul until it caught up with them,” he said. “As long as there was a trickle of money coming in that was just enough to stay ahead. It sounds like that’s where they were, but that can’t go on forever.”
He also said that while Hoops will be branded as the bad guy, he seems to be making a legitimate effort to continue as a business and not cut and run.
“I think he really wants to run these companies and probably has some of his wealth into this. He has skin in the game,” Godby said. “As much as people may be angry with him, it’s often the case that when a private business fails it’s very costly to the owner of the business.”
If Hoops’ emergency funding plan is accepted by the court, it still won’t be business as usual for Blackjewel or Powder River Basin coal, he said.
“Everything after this will be very different,” he said. “Even after you recover from a heart attack, you do things different than you did before, and this was a heart attack. … If people hadn’t realized it previously, clearly big changes will have to be made in the basin because the current conditions can’t continue.”
Staying upbeat
Rhonda Brewer was one of several people who packed the Railyard on Tuesday after the restaurant helped raise and donate more than $2,000 to cover a running tab for Blackjewel employees who were suddenly out of work.
Instead of being bummed out about the situation, Brewer, an 18-year coal industry worker, took the high road and chose to stay positive.
“I believe that upper management is doing the best they can to get our jobs back,” she said. “I support everything the company is trying to do and I’m not going to overreact on what the outcome is.”
Kenton Ripley, Brewer’s friend and fellow “D” shift worker, made sure she meant the right kind of upper management.
“The local management,” Ripley interjected. “The day I left, everyone below my line manager was in tears because they didn’t know what was going on or how to handle it. As far as Hoops goes, I don’t think he had malicious intentions.”
Jacob Williams, although optimistic, said that Hoops may have been in over his head with Blackjewel.
“He was trying to make ends meet and probably bit off a little more than he could chew,” Williams said.
Before the court ruling, Brewer said she and the rest of her coworkers were just waiting it out.
Scott Cundy, another Blackjewel miner, also was hopeful that “we’ll be back to work tomorrow.”