Allegiance Coal - Case Update

Shaun Fraser and Jason Ireland of McGrathNicol have given an update on their administration of Allegiance Coal (ASX:AHQ), a coal miner with interests in the development and operations of mining assets in the USA and Canada. The company entered voluntary administration on 22 February 2023 after secured creditor Collins St. demanded repayment of its c. A $42.9 million convertible note. The appointment was referred to McGrathNicol by the company’s CEO, who previously engaged the firm to review its operational and liquidity position and explain available options. Since the company’s incorporation in 2011, it has acquired several North American mining projects. The process to start generating revenue from the mining projects has proven costly though, as the company encountered staff shortages, skill gaps, poor equipment performance and permit issues. This was only intensified by falling thermal coal prices and operational shutdowns caused by COVID-19, and Collins St. was unwilling to provide additional short term funding outside of an insolvency proceeding. No DOCA is being proposed for the group; its primary assets are being sold through parallel US Chapter 11 proceedings and Australian receivership proceedings (Richard Tucker and David Osborn of KordaMentha are the controllers). The administrators are therefore proposing that the company be wound up. Full report.