Australian coal miner Paringa Resources (ASX: PNL) has filed for voluntary bankruptcy in the US through its subsidiary Hartshorne Mining Group LLC and is set to conduct a “value maximising sale” of its US assets.
The company filed Chapter 11 petitions in the US Bankruptcy Court for the Western District of Kentucky and will divest the operating Poplar Grove coal mine, the undeveloped Cypress coal project and other business assets.
Also known as the “reorganisation bankruptcy”, Chapter 11 is for businesses that wish to keep operating but need time to restructure their finances in order to pay the bills.
Filing can be done voluntarily or it can be forced on a business if three or more creditors file a petition with the bankruptcy court.
In March 2019, Paringa secured an $84 million term loan facility to repay debt and accelerate a planned expansion of the low-cost Poplar Grove.
The facility was designed to refinance the company’s $31m debt with Macquarie Bank, fast track the expansion of a planned third mining unit at the project, and provide additional working capital.
Paringa chief executive officer Egan Antill said continued operational and technical challenges had prevented the company from achieving anticipated volumes.
“After a thorough evaluation of our near-term financial outlook and operational performance, [we] have determined that additional financing is needed to continue our efforts,” he said.
“Accordingly, we are pursuing an accelerated sale process to identify potential new owners who can continue this work while optimising value for all stakeholders including our lenders, employees, customers, and suppliers.”
He said the Chapter 11 process will provide “time, protections, and access to additional near-term financing” to complete a sale process and determine the appropriate path forward.
Business as usual
Paringa said Hartshorne would continue normal mining operations during the bankruptcy and sale process, after transitioning from two mining units to one mining unit.
The subsidiary has filed a series of first day motions which will allow it to conduct operations in compliance with environmental and applicable regulations, maintain employee compensation and benefits, continue customer shipments and make payments to suppliers in full for goods and services provided after the filing date.
Hartshorne has also obtained an $11.36m commitment for debtor-in-possession financing from current senior secured lenders.
The financing is expected to provide sufficient liquidity to fund Hartshorne’s operations during the sale process.
Paringa’s shares have been suspended from trading.