CHARLESTON, W.Va. — Bankruptcy filings by Murray Energy show that the company views itself increasingly burdened by debt and isolated in a challenged marketplace but well-positioned to emerge from reorganization.
“Despite market challenges, Murray is well-positioned to maintain its status as a leading operator in the coal industry both domestically and abroad for numerous reasons,” according to a bankruptcy statement by new company president Robert Moore.
Moore has been an executive in the company for years but now leads its day to day operations through the reorganization. Founder Bob Murray, who had been president, becomes chairman of the board of directors.
Murray Energy announced its Chapter 11 bankruptcy filing on Tuesday morning, after a month foregoing payments to debt-holders.
Murray’s filings showed $2.7 billion in debt and more than $8 billion in actual or potential legacy obligations under various pension and benefit plans.
“Although Murray has been able to outlast many of its competitors, mounting debt and legacy liability expenses have become too heavy of a burden to sustain under current industry conditions,” Moore wrote in a 39-page statement.
“There simply are no creative management solutions, operational improvements, or strategic or financial options remaining, even for Murray; the company has exhausted all options and liquidity.”
The company says it will operate normally during the bankruptcy reorganization with cash on hand and an influx of up to $350 million by lenders who will likely emerge as operators of the reorganized company.
The statement by Moore says the company already has taken steps to become more efficient, pulling back coal production from 62.8 million tons down to 52.6 million tons. And it has decreased its costs per ton by about 18 percent in recent years.
Murray also has strengths of a diversified portfolio of valuable operating assets as well as a top-notch management team and workforce, Moore wrote.
But the bankruptcy process is also aimed at helping Murray Energy shed debt.
While the possibility of emerging from bankruptcy with fewer obligations gives hope to Murray’s long-term viability, the fate of corresponding healthcare and pension obligations is a major worry for retired mine workers and their spouses.
Those concerns drew repeated statements of concern on Tuesday by the United Mine Workers and U.S. Sen. Joe Manchin.
Murray is the largest closely held coal company in the nation and a major player in West Virginia’s energy and political landscape. It’s also a major employer with more than 2,100 active union employees plus more than 14,000 retirees.
“This is huge,” Roberts said on MetroNews’ “Talkline.”
Bankruptcy filings by Murray Energy depict the company as trying to remain solvent as coal markets became more challenging though the emergence of natural gas and renewable energy supplies.
And as other coal companies filed for bankruptcy and shed their own liabilities, Murray lost competitive advantage and was isolated as one of the few companies still paying into national pension obligations.
Bob Murray founded the energy company that bears his name in 1988 through the purchase of The Ohio Valley Coal Company’s Powhatan No. 6 mine.
He focused on high heat bituminous coal that he believed would be valuable for power generation. Murray later moved into metallurgical coal, used for the production of coke, a basic component of steel production.
In 2013, Murray made a major move by purchasing Colidation Coal Company and some of its subsidiaries from CONSOL Energy.
Murray now owns 18 active coal mines. Last year, Murray mines produced 53 million tons of thermal coal, generating $2.5 billion in revenue.
Since their acquisition, the met coal mines have produced more than 420,000 tons of coal and $30 million in revenue.
But, Moore wrote in his statement, “The impact of depressed demand and pricing in both domestic international markets has hit Murray hard in recent months: customers with pre-existing commitments have simply refused to accept delivery, and with export markets closed there is simply no alternative market to place product, resulting in the temporary idling of mining operations.”
More than 40 coal companies have filed for bankruptcy since 2008, Moore noted, with more than a half dozen major operators filing in the last year.
“These bankruptcies have affected thousands of workers across the United States, and they have left their mark on Murray,” Moore wrote.
“Competitors have used bankruptcy to reduce debt and lower their cost structures by eliminating cash interest obligations and pension and benefit obligations, leaving them better positioned to compete for volume and pricing in the current market, while Murray continued to satisfy its significant financial obligations required by the weight of its own capital structure and legacy liability expenses.”
The result, Moore wrote, was that Murray generated little cash after satisfying debt service obligations, paying employee health and pension benefits, and maintaining operations.
So now, Murray says it will have to do it too.
Especially worrisome are the company’s contributions to a national agreement meant to guarantee pensions for miners. As other companies went bankrupt, Murray was one of few continuing to pay. And as Murray seeks bankruptcy protection, that’s one more element of support being taken away from the pension guarantees.
The 1974 Pension Plan, an element of several multi-employer agreements involving Murray, provides benefits to about 87,000 retired miners and surviving spouses.
The recent wave of coal company bankruptcies resulted in withdrawal after withdrawal, leaving the beneficiaries as “orphans.” By the start of this year, according to Murray, there were 11 employers still contributing to the plan compared to 2,800 contributors in 1984.
Murray’s bankruptcy filing characterizes the company as standing virtually alone.
“Murray is the last major employer funding a staggering 97 percent of total contributions to the 1974 Pension Plan, paying approximately $15 million in 2018 alone,” Moore wrote.
He continued, “If Murray withdraws from the 1974 Pension Plan, the withdrawal liability could be $6.4 billion or more, with annual estimated payments of approximately $32 to $35 million in perpetuity.”
That is a particular source of worry for the United Mine Workers union, which said Murray is bound to file a motion to throw out its collective bargaining agreement.
“It will seek to be relieved of its obligations to retirees, their dependents and widows. We have seen this sad act too many times before,” stated Roberts, the UMW president.
Roberts said the union will deploy its own legal, financial and communications teams to fight for its members in bankruptcy court. At the same time, the union vowed to push Congress for backing of pension and healthcare plans.
“This is also the final shoe to drop in the battle to preserve retired miners’ health care and pensions,” Roberts stated. “We have been warning Congress for more than a year that this day was coming. Let this finally be the catalyst that spurs action this year on Capitol Hill. There truly is no more time to wait.”
— MetroNews (@WVMetroNews) October 29, 2019
Manchin spoke on the floor of the U.S. Senate about the Murray bankruptcy filing. He pushed, as he has for several years, for a bill meant to protect miners’ healthcare and pensions.
“It’s a sad day when West Virginia workers and their families can lose everything they’ve worked for due to another corporate bankruptcy,” Manchin said.
Manchin introduced separate legislation called the “Stop Looting American Pensions” Act.
In comments that made specific reference to the Murray bankruptcy, the senator said the bill would curtail the practice of executives gaining shelter during bankruptcy while workers lose out on long-promised benefits.
The bill would change current bankruptcy laws to increase the priority of workers during bankruptcy proceedings, Manchin said.
“Workers expect the wages they have contributed to be there when they retire, as they were promised. But under current law, workers’ pensions aren’t protected, and executive and investment firms exploit bankruptcy law for their own benefit,” Manchin said. “That it isn’t right.”