The Knoxville, Tennessee-headquartered company, which operates in West Virginia and Virginia, was delisted from the Toronto Stock Exchange yesterday, having listed $US0-50,000 ($A0-65,900) in assets and about $100-500 million in liabilities.

Xinergy said it would operate its businesses and continue customer shipments without interruption during the reorganisation, would continue to pay its employees in the normal course and also filed a motion with the court seeking to honor its pre-petition employee obligations.

Xinergy CEO Bernie Mason said Xinergy determined that a Chapter 11 filing was a “necessary and prudent step and the best way to obtain the financing necessary to maintain regular operations and allow for a successful restructuring”.

“Over the past several years, the coal markets in the US have faced a number of significant challenges, including increased environmental regulations and reductions in demand due to weaknesses in the economy and lower natural gas prices,” Mason said.

“Additionally, continued weakness in the market for metallurgical and thermal coal, combined with an extremely cold winter that impacted the mining and shipment of coal, has continued to erode Xinergy's cash position.”

Xinergy said it planned to use the Chapter 11 process to undertake a financial restructuring and create a “strong financial foundation for the company's future”.

In conjunction with the filing, Xinergy is seeking approval to obtain debtor-in-possession financing, which, once approved by the court, will provide an immediate source of funds to the company which, along with the cash generated from its ongoing operations, will enable it to satisfy obligations associated with the daily operations of its businesses, including the timely payment of employee wages and other obligations.

“We are optimistic that Xinergy will emerge from our Chapter 11 reorganisation as a stronger, more competitive company that is well positioned for success in the coal industry,” Mason said.

“We have appreciated the tremendous support of our customers, employees and vendors throughout our history and look forward to continued good relations during this important phase.”

Hunton & Williams is serving as Xinergy’s legal adviser, Cassels Brock & Blackwell is its Canadian counsel and Global Hunter Securities is serving as financial adviser.