Blackhawk Mining has entered into a forbearance agreement with required first lien and second lien term loan lenders, giving the parties until roughly the end of the month to negotiate a deal to restructure the coal producer’s debt of about $1 billion, according to sources.
The agreement comes after Blackhawk elected to skip an amortization payment of about $15 million on the first lien tranche due at the end of March, the sources added. Blackhawk also has interest payments on its first lien and second lien term loans due this month that it will likely not make good on, as the parties are negotiating a deal, the sources said.
Blackhawk’s capital structure includes a $59 million first lien asset-based revolver maturing in September 2022, a $639 million first lien term loan due February 2022 and about $300 million outstanding on a second lien term loan maturing in April 2021, Reorg
reported previously.
The first lien term loan was quoted today at 72.5/74.5, while the second lien term loan was quoted at 40/42, according to a trading desk.
Blackhawk Mining is working with Centerview Partners as financial advisor and Kirkland & Ellis as legal advisor, and a group of lenders with holdings in the company’s first and second lien term loans has been working with Davis Polk, Reorg reported.
The Lexington, Ky.-based company mines and sells metallurgical, thermal, PCI and specialty coals from the Central Appalachian basin and thermal coal from the Illinois Basin. It has faced challenges integrating acquisitions as it competes with more efficient coal companies in the Central Appalachian basin, including Contura Energy and Coronado Global Resources, the sources added. In addition to the operational issues, liquidity has been impaired by higher labor costs because of a shortage of skilled workers and increasing capital expenditure needs in the face of aging equipment, the sources said.
In the fourth quarter of 2017, Blackhawk received consent from first and second lien lenders to waive five quarters of amortization payments and reset maintenance covenant levels. The amortization payments were to resume in the first quarter of 2019.
Formed in 2010, Blackhawk operates nine mining complexes across three states with about 2,300 employees, according to its
website. The company has made attempts at consolidation, including acquisitions of the
Hazard thermal mining complex from Arch Coal for $26.3 million, mining company James River Coal Co.
for $52 million in 2014, and certain assets of Patriot Coal out of chapter 11 in 2015. The Patriot deal was financed with debt provided by Patriot prepetition lenders Knighthead Capital, Davidson Kempner, Caspian and Hudson Bay Capital. Most recently, in 2018, Blackhawk Mining pursued a merger with met coal competitor Alpha Natural Resources that Alpha thwarted in favor of a
merger with its spinoff Contura Energy.
Blackhawk did not immediately respond to a request for comment. The term loan lenders’ counsel Davis Polk declined to comment.