Walter Energy Inc. has filed for bankruptcy protection after agreeing on a fast-track restructuring process that would hand ownership of the coal miner to senior creditors.

The company, which has been battered by a sharp drop in coal prices, plans to swap its senior creditors' debt for ownership of the company in a chapter 11 restructuring that may largely wipe out junior creditors and reduce labor and pension costs.

If that process isn't successful, the company said it would pursue a sale of substantially all its assets through a court-supervised auction.

The Wall Street Journal reported Tuesday that the company was close to filing for bankruptcy.

Walter Energy said it has sufficient cash to assure that vendors and suppliers will be paid in full during the reorganization process. The company had $434.7 million in cash as of March 31, according to a regulatory filing.

"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," Chief Executive Walt Scheller said in a statement.

Walter in May warned that it might consider a chapter 11 bankruptcy filing if it couldn't restructure its $3 billion debt load out of court. It skipped a bond interest payment last month, entering a 30-day default grace period that expires Wednesday.

A collapse in coal prices has Birmingham, Ala.-based Walter and its rivals hemorrhaging cash and choking on debt taken on to finance acquisitions around the start of the decade. Demand for coal burned by power plants has suffered amid competition from abundant and relatively clean-burning natural gas.

China's slowing economy has helped drive the price of coal used in steelmaking down to an 11-year low.

Walter has posted annual losses every year since 2011, when it loaded up on debt to finance a $3.3 billion acquisition of Canada's Western Coal Corp.

The deal was part of an ill-timed wave of coal-industry consolidation, fueled by optimism about China's urbanization that drove a boom in metallurgical coal used in steelmaking. In 2011, demand got a temporary jolt from severe flooding in Australia's Queensland state, which sidelined production there.

Coal miners' woes are coming to a head after years of decline. In addition to low prices, the industry is also struggling with obligations tied to mine-cleanup regulation and an underfunded multiemployer pension plan.

Patriot Coal Corp. filed for chapter 11 bankruptcy protection in May. Alpha Natural Resources Inc. and Arch Coal Inc. are working with bankers and lawyers who specialize in helping struggling companies restructure debt and deal with creditors, The Wall Street Journal has reported.

Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com

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