Pandemic, Energy Prices Send Minerals Biz Covia To Ch. 11

By Elise Hansen
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Law360 (June 30, 2020, 11:19 AM EDT) -- Minerals company Covia filed for Chapter 11 protection in a Texas bankruptcy court to cut debt and fixed costs by more than $1 billion, citing the effects of the COVID-19 pandemic and recent energy price shocks on its business.

Covia Holdings Corp. and 27 U.S. affiliates filed their petitions in the Southern District of Texas' bankruptcy court late Monday, with the company saying it has $250 million in cash reserves that it plans to use to fund continued operations and long-term investment plans. Covia's foreign subsidiaries, including those in Canada, Mexico and Denmark, were not included in the filings and are continuing operations, according to the announcement.

CEO Richard Navarre said in an accompanying statement that the pandemic and energy price shocks had significantly impacted Covia's end markets and its customers.

"We have made important and substantial progress over the last year executing our strategy and aligning our business with changing market conditions, however, the negative impact of the pandemic and energy downturn has required this action," Navarre said in the statement.

Covia provides a range of products such as silica sand, clay and coated materials to energy and industrial customers in the oil and gas, ceramics, metals, construction and recreation industries, among others. It has 32 active mining facilities, according to court filings.

The company had financial challenges prior to the pandemic, including long-term debt, high fixed costs and "outsized" logistics networks, the filings said.

Covia was formed in 2018 via a merger of frac sand producers Unimin Corp. and Fairmount Santrol Holdings Inc. At the time, the newly combined company hoped to take advantage of the growing market for frac sand, but lower oil prices and a capital crunch led many energy companies to shift to lower-cost sand options, which have become increasingly available in recent years, the court filings said.

"The declines in demand across the energy industry and surplus frac sand supply have fundamentally impaired the debtors' energy segment for the foreseeable future," the filing said.

The pandemic and plunge in oil prices further hurt both Covia's energy segment and its prospects for its industrial business, the filing said.

Covia said it has entered a restructuring support agreement with a group of lenders that hold the majority of its secured debt. Covia said it expects to have funds available for unsecured creditors.

Covia Holdings was in talks with its majority stakeholder, SCR-Sibelco NV, about a deal to take back debt and inject new funds, but Sibelco ultimately dropped its proposal in the face of a counterproposal from the lenders, according to court documents.

Covia's request for treatment as a complex bankruptcy case was granted Tuesday. A hearing on Covia's other first-day motions is scheduled for Tuesday.

Covia is represented by Jonathan S. Henes, Joshua A. Sussberg, Benjamin M. Rhode and Scott J. Vail of Kirkland & Ellis LLP and by Matthew D. Cavenaugh and Vienna F. Anaya of Jackson Walker LLP.

The case is In re: Covia Holdings Corp. et al, case number 20-33295, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.

--Additional reporting by Benjamin Horney. Editing by Marygrace Murphy.

Update: This story has been updated with counsel information and additional information from court filings.

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