Alpha Natural Resources files for bankruptcy protection

The slump in the coal market has claimed another victim.

As coal companies worldwide slash costs, lay off workers and sell assets as a way of shoring up losses, Alpha Natural Resources (OTCMKTS:ANRZ) filed for bankruptcy protection on Monday.

The second largest coal company in the United States made the filing in Richmond, Virginia with its balance sheet showing assets of $10.1 billion and liabilities of $7.1 billion. The bankruptcy is a big concern for the U.S. coal belt, including eastern Kentucky, Wyoming, West Virginia and southwestern Pennsylvania; the company has a payroll of 8,000 employees.

Kevin Crutchfield, Alpha’s chairman and CEO, tried to put a positive spin on the news in a press release issued Monday:

“While a difficult decision, this voluntary Chapter 11 filing is the right strategy at the right time for the future of our business. It will enable us to build on the significant steps we have taken over the past several years to restructure our debt and protect our operations. I am confident Alpha will emerge from this process as a stronger company, with a diversified resource base and better positioned for the future.”

The market however wasn’t so sanguine, with investors dumping the stock in droves. As of lunchtime on the East Coast, shares were down 23.9 percent. Now trading at 3 cents a share, the value drop is spectacular considering that Alpha Natural Resources was in 2008 commanding $104.44 a share. The company now has a market value of $7.82 million, less than many junior explorers.

In the press release, Crutchfield said the U.S. coal industry “is in an unprecedented period of distress.” He blamed the industry’s problems on increased competition from natural gas, an oversupplied market, historically low prices due to weak global economies, and increased regulation that has pushed electric utilities to transition away from coal-fired power plants.

However, he said he believes that while the sector will get smaller, “coal will continue to play a critical role in providing affordable and reliable electricity and in the production of steel for infrastructure.”

“The change and challenges the U.S. coal industry has experienced over the last several years are greater than any in the past three decades,” Crutchfield said. “There is no doubt more uncertainty ahead, but also transformational opportunity in the coal sector for those who make proactive, strategic decisions.”

Many will point to expensive acquisitions made during better times for the U.S. coal industry as the chief architects of the company’s demise. In 2009 Alpha bought Foundation Coal for $2 billion and two years later, absorbed Massey Energy for $7 billion following the Upper Big Branch coal mine disaster.

According to Forbes, since 2011 the company has idled or closed more than 80 mines, fired 6,500 workers and slashed capital expenditures by 55 percent, or $225 million, in 2015. The company’s chief financial and strategy officer said on Monday that if Alpha can chip away at $3 billion in debt the firm may still be able to recover.

Chapter 11 “will enable them to continue to restructure their operations and debt structure while riding out the storm that has beset the coal industry,” Philip Cavatoni said in the bankruptcy filing.