Those creditors also joined a separate involuntary Chapter 11 suit filed in the Lexington court by three Frasure Creek creditors: Austin Powder Co., Cecil I. Walker Machinery and Whayne Supply Co. They allege Frasure Creek owes them more than $20 million for goods, services and parts they provided.
Trinity, acquired by Essar for $600 million in 2010, is a Central Appalachian coal producer with holdings in Breathitt, Floyd, Knott, Magoffin and Perry counties in eastern Kentucky and Boone, Fayette, Mingo, McDowell and Wyoming counties in West Virginia. The company’s operations produce both steam and metallurgical coal.
In a court filing, Ronald Spitzer, managing director in the asset recovery group at Credit Agricole, said he had “lost all confidence in Trinity’s current management team and in Essar’s ability to effectively oversee Trinity’s operations.” Trinity has been in default under Credit Agricole’s credit agreement since August 2011, he said, and stopped making scheduled quarterly principal and accrued interest payments in June 2012. Since then, he said, Credit Agricole has issued Trinity eight reservation of rights and notice of default letters.
Spitzer traced Trinity’s alleged management troubles to the mid-2011 resignation of the company’s entire management team, including CEO Ken Woodring, along with its CFO, chief operations officer, senior vice president of marketing, senior vice president of business development and general counsel.
“Since that time, Credit Agricole has witnessed Essar keep Trinity’s management and board of directors in a constant state of chaos,” he said. Since Woodring’s departure, Trinity has had four CEOs—Madhu Vuppuluri, Mark Clemens, Doug Blackburn and Vijay Modi, according to Spitzer. “Of these, only two—Mark Clemens and Doug Blackburn—had any relevant Appalachian mining experience.”
Last fall, Frasure auctioned off some of its mining equipment. The company, which had operated seven surface mines in eastern Kentucky and employed almost 600 people, ceased active mining in the commonwealth.
In asserting the need for the court to appoint a trustee, Spitzer said Trinity’s current management is “wholly incapable of managing and/or restructuring Trinity. Trinity’s management has lost the trust and confidence of its lenders, creditors and other stakeholders.”
Chip Bowles, a Louisville, Ky., attorney representing Trinity, declined to comment on the involuntary bankruptcy filing. Essar officials could not be reached for comment. Trinity had until mid-March to file its formal response with the court.