Judge Approves Second Loan to Blackjewel, But Appalachian Employees Still Without Pay

Jul 20, 2019

A federal bankruptcy judge has approved a second limited loan package for ailing coal company Blackjewel LLC. 

During an emergency hearing Friday afternoon, lawyers representing Blackjewel told U.S. Bankruptcy Court for the Southern District of West Virginia Judge Frank Volk the $2.9 million financing package, which includes only $900,000 in new money, would be used as a “bridge” to try and shore up the company as it prepares to sell its mines.

Squire Patton & Boggs Attorney Stephen Lerner, who is representing Blackjewell, told the court the “financing would be used for limited purposes to get us through Monday.” 

Lerner said the additional money would be used to pay insurance and workers' compensation bills, but will not go toward nearly $11.8 million in payroll and taxes owed back wages to hundreds of Blackjewel employees in Kentucky, Virginia and West Virginia. The company also owes Appalachian employees $1.2 million in employee retirement contributions

Volk pressed Blackjewel’s lawyers on the issue.

“The court is concerned about the employees,” he said. “Where do they fall in the scheme in respect to recoveries in this case?”

Lerner told the court the company was “working day and night” to secure additional financing to stabilize Blackjewel. 

“We are highly aware of the distress that the employees have suffered as a result of what's occurred here,” he said, adding that any debts owed to employees are “top of the food chain” once a bankruptcy restructuring deal is inked. 

But until that happens, Lerner told the court it’s unlikely Blackjewel will be able to bring back most of its Appalachian employees.

“I won't say it's impossible, but I think at this point, with what we know, it's less likely to happen in the East than in the West,” Lerner said. “And that's simply because of the nature of operations and the cost structure.”

That prompted Judge Volk to ask if the company is favoring its Wyoming operations, which are larger and Lerner confirmed, more likely to be sold. The majority of the company’s Wyoming employees have received owed wages. The company owes $1.5 million in wages and taxes to western employees. 

“When I heard the disparities, it’s a question I need to ask, for sure,” Volk said.

On Tuesday, the attorneys general of Kentucky and Virginia sent a joint letter to the court expressing concern over Blackjewel’s continued inability to pay workers and urging an immediate fix. 

The filing included numerous stories, some handwritten, from miners who and are struggling while being owed thousands from the company after their June 28 paychecks bounced or in some cases were deposited, but then clawed back by the bank. 

While the judge ultimately approved the additional loan, not everyone was in favor. 

During the hearing, Kevin Barrett, a lawyer for Riverstone Credit Partners, one of Blackjewel’s financiers, expressed reservations that approving this loan is a “bridge to nowhere.” 

“What this is really doing is simply buying time,” he said.