Armstrong Energy, First Coal Company to File for Bankruptcy Under President Trump

Coal Producer Armstrong Energy Files For Bankruptcy Protection
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Armstrong Energy, Inc., a coal mining company based in St. Louis, Missouri filed for bankruptcy on Wednesday with the intention of turning ownership over to a competitor and its lender. The announcement comes on the same day that President Donald Trump tweeted a Fox News report highlighting the rise in U.S. coal production.

The company, which has the dubious honor of being the first coal company to file for bankruptcy under Trump, said it would use the bankruptcy process to restructure its operations and transfer its assets to a new entity jointly owned by KnightHawk Inc. (a coal producer) and the company’s secured bondholders.

KnightHawk will assume control of Armstrong’s ongoing operations after the process closes. Armstrong said its mining operations and shipments would continue during the bankruptcy process.

“Over the past several years, the debtors and other coal producers in the United States have encountered a series of macroeconomic hurdles, including reduced demand for coal and lower coal prices, precipitated by slow economic growth, an abundance of extremely low-priced natural gas, and increased regulatory burdens,” Armstrong Energy said in court documents. “These macroeconomic factors, coupled with the debtors’ substantial debt obligations and operational costs, strained the debtors’ ability to sustain the weight of their capital structure and devote the necessary capital to maintain and grow their business.”

Wednesday’s announcement was not a total surprise. In August, Armstrong Energy warned that it might need to file for Chapter 11 bankruptcy protection to allow it to restructure, citing “recurring losses from operations.”

In the August filing with the U.S. Securities and Exchange Commission, the company reported a $17.2-million second-quarter loss on revenue of $60.9 million. It also failed to make a $12.0-million interest payment to bondholders that was due on June 15.

While President Trump has been championing the increase in coal production, the fact is, the uptick is a result of higher exports to Asia natural gas prices that have stabilized. The fact still remains that since 2010, more than half of all the coal-fired plants in the U.S. are closed or slated for early retirement.

Armstrong Energy, via its fully owned subsidiary Armstrong Coal, is a top producer of steam coal in the Illinois Basin. The company controls over 565-million tons of proven and probable coal reserves and operates five mines in Western Kentucky. In 2016, Armstrong produced 5.9-million tons of coal from its two underground and three surface mines.

Armstrong Energy joins a long list of coal-mining companies that have filed for bankruptcy. Before Trump became president and declared an end to the “war on coal,” Peabody Energy Corporation (NYSE:BTU), Alpha Natural Resources, Inc., Arch Coal Inc (NYSE:ARCH), and Patriot Coal Corp. all filed for bankruptcy.

 

Sources

Bankruptcy Information,” Armstrong Energy, Inc., November 1, 2017.

Area coal producer Armstrong Energy files for Chapter 11 bankruptcy protection,” St. Louis Today, November 1, 2017.

Twitter post,” Donald J. Trump Twitter account, October 31, 2017, 4:41 p.m.

Form 10-Q,” U.S. Securities and Exchange Commission, last accessed November 2, 2017.

About Us,” Armstrong Energy, Inc., last accessed November 2, 2017,

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