CASE PROFILE: White Stallion Energy enters Chapter 11 in ‘dire’ liquidity situation, plans January sale

03 December 2020

White Stallion Energy LLC has filed for Chapter 11 with plans to auction its assets in January backed by debtor-in-possession (DIP) financing and a stalking horse bid from its term loan lenders.

 

The coal miner was hit with a “severe unexpected cash shortage” from a steep decline in the coal market, according to court documents. Unable to find a merger partner outside of bankruptcy, the company idled its mines and laid off its employees, electing to pursue a sale process in Chapter 11.

 

The coal miner has not yet indicated the size of the DIP from its term loan lenders, owed USD 90m.The DIP sets a series of milestones for the case, requiring the company to close a sale by 15 January. Shortly after White Stallion entered bankruptcy, fellow coal company Lighthouse Resources Inc filed its own Chapter 11 petition in Delaware.

 

Judge Laurie Silverstein of the US Bankruptcy Court for the District of Delaware has not yet scheduled a first day hearing.

 

 

 Debtwire Dockets: White Stallion Energy

 

The company

 

White Stallion, founded in 2010, owns and operates four surface mining coal complexes in Indiana and two in Illinois.

 

The company has expanded significantly in the decade since its inception, acquiring Vigo Coal CompanySolar Resources Mining, the Friendsville Mine of Alcoa, and a 51% stake in the Eagle River Mine. White Stallion reported seven million tons of coal with EBITDA of USD 26m in 2019. Prior to idling its mines, the company had 260 employees.

 

Duke Energy Indiana LLC is the company’s largest customer, accounting for 70% of sales in the nine months leading to Chapter 11.


 

The debt

 

White Stallion comes into bankruptcy with USD 103.9m in secure debt, consisting of USD 90m on a term loan due 2021 with Riverstone Credit Management as agent, USD 7.1m on an ABL due 2021 with KeyBank as agent, and USD 2m on a real estate purchase agreement due 2024.

 

 

The company also reports that it has USD 51.1m in surety bonds to secure reclamation obligations, along with USD 45m in unsecured trade debt, and USD 10m on a Paycheck Protection Program loan that it anticipates will be forgiven.

 

 

 

The descent

 

White Stallion comes into bankruptcy facing a “dire” and “severe unexpected cash shortage” following a “steep decline” in the coal market and a net loss of USD 30.1m in 2019, Chief Operating Officer David Beckman, managing director of FTI Consulting, said in his first day declaration.

 

The company enacted new cost-control procedures, Beckman said, and secured USD 4.6m in new equity contributions while exploring strategic alternatives. Those efforts were exacerbated by the onset of the coronavirus pandemic earlier this year, and White Stallion was unable to raise sufficient capital in time to consummate a merger deal.

 

In late October, the company brought on FTI and entered discussions with its term loan lenders. The lenders have funded the company in recent weeks to allow it to survive long enough to launch a Chapter 11 case, advancing USD 650,000 on 23 November and USD 250,000 on 27 November, the company reported.

 

The debtor and its lenders have now agreed that the company will sell its assets in Chapter 11, with the lenders providing DIP financing to support the case and a stalking horse bid to lead the sale process. The financing does require the company to close a sale of its assets by 15 January.

 

The advisors

 

 

The case is In re: White Stallion Energy LLC, number 20-13037, in the US Bankruptcy Court for the District of Delaware.

 

by Pat HolohanSara Tapinekis and Seth Crystall