by Jennifer Jensen, Associate Editor

Blackjewel LLC will be able to leave the lights on for a little while longer after a judge approved a $5 million emergency loan on July 3, with the contingency that its CEO Jeffrey Hoops step down. The company filed for bankruptcy on July 1.

After filing for bankruptcy, Blackjewel, with mines in West Virginia and Wyoming, sent nearly 700 employees home at its Eagle Butte and Belle Ayr mines in Gillette, Wyoming after Hoops said financially they could not keep the mines running and couldn’t afford to pay workers.

The $5 million loan, approved by Judge Frank Volk of the United States Bankruptcy Court for the Southern District of West Virginia, from Riverstone credit partners will allow the company to stabilize and protect its assets, attorney for Blackjewel, Stephen Lerner, said.

“This $5 million will not allow for full resumption of operations, but it will get us through this week and into next week,” Lerner told the court.

This amount will be used to provide security measures at its mines, professional fees, U.S. trustee fees and emergency expenses. It will also be used to fight a fire at one of the company’s Wyoming mines, if necessary, Lerner said.

While the plan was contingent on Hoops resigning, it also required any family members to resign as well. It also named Dave Beckham as acting chief restructuring officer.

This loan will not be used to compensate employees. According to several news outlets, some employees have had their paychecks withheld or bounced since June 28.

However, Lerner said a new financial plan will be presented soon, and if approved, would allow the company to reopen its mines to full capacity and bring back employees.

Judge Volk previously denied a motion to approve an emergency financing plan for a $20 million debtor in possession loan, which the company said, would have kept it from having to liquidate its assets. The loan would have been funded by Hoops and his investment company Clearwater Investment Holdings.

Volk said the terms of the agreement would have “unduly prejudice the rights of other parties and interests.”

In the court filing, Blackjewel contended that if the motion wasn’t granted, it would likely have to convert the Chapter 11 cases to Chapter 7 cases, liquidate their business, and terminate their approximately 1,700 employees. This would be an “outcome that would destroy the value of the debtors’ business and would be extremely prejudicial to all of the debtors’ stakeholders,” the court filing added.

According to court documents, the company has “insufficient cash to operate their businesses” and additional liquidity is needed. “Most critically, the debtors are required to make a payment in the amount of approximately $5 million to fund their employees’ salaries on the first day of the Chapter 11 cases,” the court document said.

In the hearing, Lerner said, along with payroll, there was the fire in Wyoming and no maintenance was being done at the mines and there was no security since the shutdown. “This is the poster child for an emergency situation,” he said.

Every day the mines are closed, the company loses money, Hoops said. He testified that the mines in Wyoming ship $2 million worth of coal per day. Once the mines are back up and running, Hoops said maintenance and other issues will need to be addressed prior to restart.

“There will be a lot issues to deal with before we return to normal operations,” Hoops said.

The company owes at least $500 million in coal royalties, penalties, goods and services, and taxes. This includes $60 million to the U.S. Department of the Interior, $5 million in penalties to the Mine Safety and Health Administration, and more than $10 million to the Internal Revenue Service.

To make matters worse, a Gillette employee of Blackjewel LLC has filed a class-action lawsuit against the coal mining company. The lawsuit claimed the company failed to give proper notice or pay wages and other benefits after it declared bankruptcy and shut down the mines.

According to the Gillette News Record, David Engelbrecht is seeking 60 days’ pay and benefits from Blackjewel, which the lawsuit alleged violated workers’ rights under the Worker Adjustment and Retraining Notification Act. The WARN Act requires at least 60 days written notice of a termination, along with paying outstanding wages and other benefits.

Blackjewel’s bankruptcy filing also included its affiliate, Revelation Energy. Revelation Energy listed 24 metallurgical coal mines and processing and prep facilities in Virginia, Kentucky, and West Virginia, which employ 1,100 workers. The Appalachian mines have an estimated 600 million reserve tons of coal. Last year, the company mined 3.3 million tons. In 2017, the Blackjewel’s combined output made them the country’s sixth-largest coal producer.