A grim warning from credit rating agency Fitch Ratings estimates that a number of coal mining businesses may be in danger of falling into bankruptcy.
Photo courtesy of Trevor Gerzen (Unsplash.com)
Fitch reported that a persistently weak and volatile economy has been a large contributing factor to falling coal sales. Coupled with this is increased competition with less expensive natural gas resources and rising costs due to more stringent environmental regulations. As a result of these factors, Fitch said that demand may continue to wane and prices are likely to inflate over the course of the year, both of which may force a number of companies to seek protection under bankruptcy law.
The agency noted that two coal producers are already facing significant default risk, and since 1994, there have been 11 mining company defaults among producers with assets of at least $25 million as of the bankruptcy filing date. In addition, the asset size of those companies seeking protection has also ballooned in recent years. For example, Fitch notes that Patriot Coal Corp., which filed for bankruptcy in 2012, was more than 11 times the asset size of the next largest defaulted coal company.
The most recent bankruptcy filing among coal mining companies was America West Resources Inc., which filed for protection on Feb. 1, 2013.
John Eaves, chief executive of leading U.S. coal producer Arch Coal Inc., told Reuters that a number of factors will determine whether sales and demand rebound in the future. Arch, which sells thermal coal that is used to generate electricity, and metallurgical coal which is a steelmaking raw material, experienced a quarterly 15 percent drop in sales volume during the last three months of 2012.
“Global benchmark metallurgical prices declined 50 percent since their peak a year-and-a-half ago while U.S. thermal coal consumption declined to levels we haven’t seen since the mid-90s,” Eaves said in a conference call, according to Reuters. “Needed economic activity, unseasonably warm weather and low natural gas prices … dampen coal demand, causing coal stockpiles to grow to near record levels by May of last year.”
Are Stay Interviews the Key to Retaining Top Talent?
Retaining top talent continues to be one of the greatest challenges facing employers today. Even in an employer’s market, the loss of a key employee can disrupt operations and result in significant costs. While compensation plays a role, long-term retention often depends on workplace culture, communication, and employee engagement. One increasingly popular strategy for improving […]
Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications
Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors
The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]
Corporate Consolidation and Antitrust Issues in Mergers
Corporate consolidation involves two or more businesses merging to become a single larger entity. The result is often a stronger and more competitive company that can better navigate today’s competitive marketplace. What Is Corporate Consolidation? Corporate consolidation closely resembles a basic merger transaction. The primary difference is that a consolidation creates an entirely new business […]
Business law plays a critical role in nearly every aspect of running a successful enterprise, from negotiating a commercial lease to drafting employee policies to fulfilling corporate disclosure obligations. Understanding what is business law and your legal obligations can help your business run smoothly and build productive relationships with clients, business partners, regulators, and others. […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
