The company said it has entered into an agreement with certain of its senior lenders on the material terms of a restructuring.

To implement this pre-negotiated restructuring, Walter Energy and its US subsidiaries have filed for relief under chapter 11 but its non-US operations, including those in Canada and the UK, are not included in the filings, Walter CEO Walt Scheller said.

“This restructuring plan provides a roadmap for Walter Energy to establish a sustainable capital structure, make further changes to operational cost drivers, and ensure that the company can continue to operate safely and competitively in the years ahead,” he said.

“With the support of our key senior lenders, we will use this process to pursue the best possible outcome on behalf of all of our stakeholders, including our employees and our communities. In the face of ongoing depressed conditions in the market for met coal, we must do what is necessary to adapt to the new reality in our industry.”

Walter Energy has sufficient cash to assure that vendors, suppliers and other business partners will be paid in full for goods and services that they provide during the reorganisation process, the company said.

The terms of the restructuring contemplate the senior lenders converting all of their debt into equity. The agreement also establishes a timeline for confirmation of a chapter 11 plan and the fulfilment of certain other conditions and milestones.

If the company otherwise cannot satisfy the various conditions and milestones or confirm a chapter 11 plan, it will pursue a sale of substantially all of its assets through a court-supervised auction process.

Walter Energy is hoping that if bankruptcy protection is granted, it would help ensure a smooth transition into the reorganisation process without business disruption.