James River Files Bankruptcy Petition

James River Files Bankruptcy Petition – Company Profile

The daunting duo of low coal prices and high debt forced James River Coal Co. and 21 subsidiaries to file in late March for Chapter 11 protection in U.S. Bankruptcy Court in Nashville, Tenn.

Through five of those subsidiaries – Blue Diamond Coal Co., Bledsoe Coal Co., Elkhorn Coal Corp., Leeco Inc., and Bell County Coal Corp. – the Richmond, Va.-based company operates underground and contract mines in eastern Kentucky. In 2002, the company sold 13.9 million tons of coal mainly to electric utilities in the Southeast, generating revenues of about $400 million.

The company sells all its coal through James River Coal Sales Inc., also based in Richmond. Altogether, James River has 1,030 employees.

As of Feb. 28, 2003, James River and the subsidiaries listed consolidated assets with a book value of about $329 million and consolidated liabilities with a book value of about $362 million, according to information filed with the bankruptcy court.

Peter Socha had served as James River’s president and CEO for less than a month when the bankruptcy petition was filed March 25. Socha, a corporate turnaround specialist with experience in the coal business, told Coal Age he was brought in “to help get the company through the bankruptcy.”

With Socha on board, James River moved quickly to try to reverse its sagging financial fortunes. “The first week we prepared for bankruptcy, the second week we did the bankruptcy, and the third week we rested,” he said.

According to Socha, perhaps James Rivers’ most pressing problem is that it is locked into too many long-term, fixed-price coal sales contracts. “Our problem was the balance sheet and the top line,” he said, noting many existing contracts pay James River “significantly below” market price for comparable product. “We’re going to have to change the terms of those contracts. We’re looking at both price and specs, and we’re trying to do everything in a very collaborative way.”

Indeed, Socha said it’s important that James River continues to be “respectful” of its relationships with customers. “Right now, we have excellent relationships with our customers.”

It remains to be seen whether James River will emerge from Chapter 11 at its present size. “I can’t say we’re going to be smaller,” Socha said. Currently, a top-to-bottom review of the company is being conducted. “We’re looking at every contract we have to supply coal and every mine available to us now or (future) mine plans … we’re seeing how they match up.”

Though no one could predict how long James River will remain in bankruptcy, Socha is optimistic. “This will not be a long bankruptcy,” he said. “It doesn’t gain anything by staying in for a long time.”

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