Arch Coal Inc. files for Chapter 11 Bankruptcy Protection

Arch Coal Inc. files Chapter 11

Recently, Arch Coal Inc., one of the preeminent coal production companies in the U.S., announced that it had filed for Chapter 11 bankruptcy protection. According to The Wall Street Journal, the company reached a restructuring agreement with its primary lenders to allow it to cut $4.5 billion in debt.

Arch Coal becomes insolvent

In its bankruptcy documents, Arch Coal cited worsening economic conditions in the market for coal recently. A separate Journal report notes that other former coal-producing giants such as Patriot Coal, Walter Energy and Alpha Natural Resources already have filed for Chapter 11 bankruptcy protection since the start of 2015. The decline of the coal industry is directly tied to an economic slowdown in China that has driven down coal prices in steel manufacturing, as well as increased competition from natural gas as a more cost-effective alternative. As a result, major domestic coal producers have gone through significant downsizing recently.

Arch Coal listed assets at approximately $5.8 billion with $6.5 billion in debt, most notably including $2.875 billion in unsecured bond debt and $350 million in senior secured bond debt. The Journal reported that currently, its top-ranking debt load sells for 43.5 cents on the dollar, its unsecured debts are selling for under a penny on the dollar and its senior secured debt is selling for roughly five cents on the dollar.

This downward trend put the company’s financial future in doubt, which caused Arch Coal to seek a 30-day grace period from its senior debt holders. The extension came as part of its indenture agreements with creditors that enabled the company to delay its $90 million interest payment in December.

Arch’s restructuring plan

Arch Coal Inc. stated in its bankruptcy petition that its reorganization proposal will allow it to cut $4.5 billion in debt. According to ABC News, the deal will allow the company to restructure its balance sheet through a debt-for-equity swap that would hand over control to its first lien debt holders. Unsecured creditors will also gain equity shares in the company with 4 percent of the new Arch Coal.

The restructuring agreement will provide the company with a $275 million debtor-in-possession financing to go with the $600 million in available cash. According to a Fox Business report, the deal will allow the company to maintain its current operations through the bankruptcy period. This is important for Arch Coal because it plans to emerge from the restructuring process as a viable business for mining operations and customer shipments throughout the world.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.