Trent Ernst, Editor
On June 9, the BC Labour Relations Board found in favour of the United Steelworkers Union, who have been arguing that Walter Energy failed to give the employees 60 days notice before it idled operations at Wolverine Mine, instead laying off
The idling of the mine resulted in the immediate layoff of the vast majority of bargaining unit employees. Walter still says it intends to reopen its mining operation within the recall period and, as such, the layoff is temporary. Arguing that temporary layoffs do not trigger the notice and consultation requirements in Section 54 of the Code. They asked that the application be dismissed.
However, Vice-Chair of the Labour Relations Board Jacquie de Aguayo disagrees. In the ruling, she says she finds Walter violated its duty to give notice to, and consult with, the Union when it idled the Mine and implemented the Indefinite Layoff.
In the ruling, de Aguayo orders Walter to pay “damages equivalent to 60 days’ pay for each of the affected employees, subject to mitigation.”
The Union was also seeking additional damages for the lost opportunity to consult, however, de Aguayo says the evidence is not sufficient “to establish a basis for damages to the Union in addition to the real, not nominal, damages award to the affected employees in the bargaining unit. For this reason, I find the Union is not entitled to damages for the lost opportunity to consult.”
In her conclusion, de Aguayo writes “I find the examples of absurd or arbitrary outcomes relied on by the Employer are not necessary consequences of my conclusion that the Indefinite Layoff gave rise to the Employer’s duty to give Notice to the Union. As such, I find the Indefinite Layoff in the present case gave rise to the duty to give notice to, and consult with, the Union. Having failed to give Notice to the Union, I find the Employer has violated Section 54(1) of the Code.”
In their most recent quarterly filings in May, Walter Energy said it might have to declare Chapter 11 bankruptcy if it couldn’t figure out a way to pay its debts.
However, the day after releasing their filings, the company said it would be able to come up with the $64.2 million in interest payments that were due on May 15.
In its quarterly 10-Q fillings, the company said there is “substantial doubt” about its ability to continue as a going concern. “Over the course of the last three years, our results of operations, including our operating revenues and operating cash flows have been negatively impacted by weak coal market conditions, depressed metallurgical coal prices, reduced steel production and global steel demand.”
In the filings, the company said it was considering “reorganization under Chapter 11 of the United States Bankruptcy Code.”
The company owed $64.2 million in interest to bondholders, which the company says now says it will be able to meet.
While they made it past that hump, pundits worry about the long-term viability of the company. In the filings, Walter stated “our cash flows from operations were insufficient to fund our capital expenditure needs for 2014 and 2013 and we expect this trend to continue in 2015. If market conditions do not improve, we expect our liquidity to continue to be adversely affected.”
The deadline for the payment was May 15, which was the end of a 30-day grace period for making the payment. “During the 30 day grace period, the Company is working with its debt holders to establish a capital structure that will position the Company to weather a highly competitive and challenging market.”
Last week, Walter again announced it was exercising a 30-day grace period for cash interest payments on another bond payment.
This follows hot on the heels of a round of layoff notices at the Willow Creek mine. While there has been no active mining there for nearly a year, Walter has slowly been picking away at the stockpiled coal there.
The layoff notices took effect as of June 11, leaving only 18 people employed by the company in Northeast BC: eight people at the Wolverine mine and ten at Willow Creek.
Walter recently issued similar layoff notices to the 23 employees working on clearing the stockpiles at Brule.
That mine was completely idled as of May 26.
Bankruptcy rumours have dogged the beleaguered company since at least 2013.
The American-based company started in the 1940s as a company that built affordable housing in Florida, diversifying into mortgage financing in the 1950s and getting into coal mining in the 1970s. At its peak, the company, then known as Walter Industries Inc., had more than $2.4 billion in revenue and over 25,000 employees. In 2009, the company had pared itself down to being a met coal miner, rebranding itself as Walter Energy.
The company has been nursing an extremely high debt load—about $3.1 billion—which wasn’t helped when it purchased Western Coal for $3.3 billion in 2010, making the company the second-largest producer of met coal in North America.
At the time, met coal prices were surging and Walter Energy was riding high, with stock prices rising to US$141.17 in 2011.
Since then, though, Australian producers have flooded the met coal market, driving prices down to under US$110/tonne, and Walter Energy Shares have dipped as low as US$0.34 in the last week. The company has more than $3-billion in debt.
According to a recent report in Bloomberg Business, Walter, which hasn’t turned a profit in four years, could start Chapter 11 talks as soon as this month.
In January, the company said it would not be paying dividends to shareholders, as it tries to ride out the downturn.
And despite this most recent scare, the company says it does not have a liquidity issues, with approximately $435 million of cash and investments as of March 31.
A Chapter 11 filing would offer the company some protection from its creditors and allow the company to reorganize its finances in an effort to remain a viable business, and about a quarter of the companies that have restructured have remained viable after emerging from chapter 11.
Another major US coal mining company, Patriot Coal Corp, filed for chapter 11 last month, the second time in three years for the thermal coal company.