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Arch Coal Staves Off Bankruptcy

The coal company said it is delaying a $90 million interest payment to continue discussions with creditors regarding a balance sheet restructuring.
Katie Kuehner-HebertDecember 17, 2015

Arch Coal on Tuesday staved off bankruptcy by announcing it had delayed a $90 million interest payment that was due that day.

The St. Louis company said that it had intended to use the 30-day grace period on its debt payment to continue “constructive discussions with various creditors regarding its ongoing effort to develop and implement a comprehensive plan to restructure its balance sheet.”

Arch, burdened by regulations and plummeting coal prices, said last month it could file for bankruptcy, even if it struck a restructuring agreement, according to Reuters. The company was widely expected to file for bankruptcy by Tuesday.

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Arch had about $694.5 million of liquidity as of September-end and about $5 billion in long-term debt, stemming mainly from its purchase of International Coal Group in 2011.

If the company ultimately files a petition for bankruptcy, it would become the fourth coal miner to declare this year, joining Walter Energy, Alpha Natural Resources, and Patriot Coal.

“You are seeing coal companies that are filing” for bankruptcy “with a lot of cash on the balance sheet,” Reorg Research analyst Zachary Bader told Reuters. “One reason is that they have over-leveraged capital structures….it doesn’t make economic sense to pay interest to debt holders that have claims that are essentially worthless.”

Arch in October ended a proposed debt swap after failing to strike a deal with creditors. Debt swaps have become common in the wider energy industry, said Reuters, with companies such as Chesapeake Energy exchanging unsecured debt for secured debt.

According to the statement by Arch, it “has sufficient liquidity to continue normal mining operations and to meet its obligations in the ordinary course.”

Arch Coal’s market capitalization was $3.78 billion at the end of last year, and near the close on Thursday the company was valued at about $20 million.