Campbell County objects to Blackjewel sale

GILLETTE — In the absence of another qualified and better bid, Contura Energy Corp. may be one step closer to acquiring the Eagle Butte and Belle Ayr mines in Campbell County and nearly 600 workers may be close to being recalled to work.

Wednesday was the deadline for bids in Blackjewel LLC’s Chapter 11 bankruptcy auction of its assets and the culmination of a month of turmoil for the company. Since filing for bankruptcy July 1, the company has:

Locked out its 1,700 employees in Wyoming, Kentucky, Virginia and West Virginia;

Ousted its former CEO and president, Jeff Hoops Sr.;

Bounced about 1,100 paychecks issued to workers at its Appalachia properties;

Failed numerous times to secure financing to see it through bankruptcy and held multiple emergency court hearings;

Is left with the prospect of selling its Wyoming mines and the Pax Surface Mine in West Virginia, but converting its other properties to Chapter 7 liquidation, and

Missed making more than $1 million in employee 401(k) and health savings account contributions to their accounts.

The speed of Blackjewel’s bankruptcy that’s seen it go from filing to bid deadline in a month is unprecedented and allowed by Judge Frank W. Volk of the U.S. Bankruptcy Court for the Southern District of West Virginia because of the extraordinary hardship the company has put on its workers.

It’s that speed that has many of Blackjewel’s secured creditors objecting to the process and that it overcompensates for the company’s own poor management in a way that could cost those senior debt holders.

That’s the argument attorneys for Campbell County make in a motion filed Tuesday objecting to the potential Contura sale plan that would allow the company’s critical unsecured vendors to leapfrog in priority over others.

Blackjewel’s court filings list Campbell County as one of its largest creditors, owed more than $37 million in back ad valorem taxes.

When it first filed for Chapter 11, Blackjewel argued that paying those vendors and shippers was “absolutely needed to continue to operate without disruption,” Campbell County’s motion says. However, that “disruption” has already happened because the mines have been shut down and employees locked out for a month.

“Since filing Chapter 11, the Debtors’ cases have taken a dramatic turn for the worse,” the motion says. “The Debtors have ceased full mining operations. Employees have been laid off. The Debtors have very little working capital. And the Debtors announced last week that they likely will convert their cases to Chapter 7 following their proposed sale of certain assets to Contura Energy and its subsidiaries.”

The county’s motion also argues that while “lurching from one emergency motion on a few hours’ notice to another, the Debtors should not be permitted to avail themselves of the extraordinary remedy of paying the general unsecured claims of so-called ‘critical’ vendors and shippers in contravention of the Bankruptcy Code’s priority scheme.

“Indeed, Campbell County objects to the payment in full of any general unsecured claims while its secured and priority tax claims go unpaid.”

Blackjewel on Tuesday filed a motion to change its sale schedule. A sale hearing on Contura’s and any other bids for Blackjewel assets was set for Saturday but has been moved to Monday morning.

While it hasn’t responded to Campbell County’s objection specifically, the company issued a statement to its employees Tuesday explaining that the unusual nature of its bankruptcy case has been an effort to preserve their jobs.

“While the sale process is on a substantially more expedited basis than we had hoped for at the outset of the case, we believe the court’s decisions on Friday provide the best path to getting employees back to work as quickly as possible,” the statement says.