Less than two and a half years in operation, operator of Kentucky coal mining facilities JW Resources, Inc. and several affiliates filed for Chapter 11 bankruptcy protection June 30, 2015 in the Eastern District of Kentucky. JW Resources completed the acquisition of the Straight Creek and Red Bird thermal coal mining operations of Xinergy Ltd. (TSX:XRG) for $47.2 million in cash in early 2013. The Straight Creek Operations are located in eastern Kentucky and consist of approximately 48,000 acres containing an estimated 42 million tons of proven and probable high-quality thermal coal reserves.
Xinergy hasn’t fared any better than JW Resources – Xinergy separately filed for bankruptcy protection in April 2015.
According to a 2013 press release, JW Resources is majority-owned by investment funds advised by Bayside Capital, an affiliate of H.I.G. Capital, and JW Resources was formed by Bayside and Lawrence M. Clark, Jr., an experienced institutional investor with a proven track record investing in the coal and natural resources industries.
According to bankruptcy court filings, the assets JW Resources acquired from Xinergy have not met expectations:
JW Resources acquired its assets and business operations from Xinergy Corp. in February 2013 (the “Straight Creek Acquisition”). The Debtors’ business operations comprise what is known as the “Straight Creek” operations located in Bell, Leslie and Harlan Counties, Kentucky, and the “Red Bird” operations located in Bell, Leslie, Knox, and Clay Counties, Kentucky.
Following the Straight Creek Acquisition, there has been a decrease in the demand for coal and a dramatic increase in the cost of mining and processing coal, due in part to burdensome governmental regulations, with the spot price of coal per ton decreasing by 26% through April 2015. These factors have contributed to the Debtors’ inability to service its secured debt and to sustain its business operations outside of the protections of the Chapter 11