The U.S. division of Australian coal producer Allegiance Coal Ltd. won court authorization Thursday to tap its lenders’ cash to avoid a shutdown of its mining operations, overcoming a disgruntled creditor skeptical of the company’s ability to turn its business around, WSJ Pro Bankruptcy reported. Judge Craig T. Goldblatt of the U.S. Bankruptcy Court in Wilmington, Del., approved Allegiance Coal USA Ltd.’s request to tap as much as $1.7 million in cash collateral to pay wages and other business expenses as the company starts chapter 11. An Allegiance lawyer said the money will “keep the lights on” and give the business time to chart a path forward. Judge Goldblatt granted the request from multiple Allegiance subsidiaries after executives testified that management could be forced to shut down its mines in Alabama and Colorado if it didn’t get access to the cash pledged to its lenders. Allegiance CEO Jonathan Romcke testified that the U.S. business was forced to file chapter 11 this week after a fund controlled by Collins St. Asset Management sent the company a notice of default on a roughly $30 million senior bond. Romcke said the U.S. subsidiaries are working to turn around the business and the company is moving forward with its plan to pivot away from thermal coal in favor of producing metallurgical coal. The U.S. mines previously produced metallurgical coal, which sells at a significantly higher price per metric ton than thermal coal, making the switch financially prudent, Romcke said.
