ST. LOUIS – Arch Coal, Inc. (Arch) announced this week that it has filed for protection under the Chapter 11 Bankruptcy code in the United States Bankruptcy court of the Eastern District of Missouri.
According to a release from Arch, it has reached an agreement with a majority of the lenders under its $1.9 billion first lien financing facility to significantly restructure the company’s debt load. Arch has entered into a restructuring support agreement with the members of an ad hoc group of lenders that hold more than 50% of the company’s first lien debt. Under the terms of the agreement, the lenders have agreed to support a restructuring transaction that will eliminate more than $4.5 billion in debt from Arch’s balance sheet and position the company for long-term success.
The company and the ad hoc group have agreed to the principal terms of a Chapter 11 plan of reorganization, which will be subject to approval by the Bankruptcy Court.
The companies troubles have reportedly been linked to its 2011 acquisition of International Coal Group and across the board downturn in coal prices. In mid December of 2015, Central Appalachia coal was valued at $43.50 per short ton; a 22.46 percent year-to-date decline.
This reorganization, could result in the closure of the remaining Central Appalachian mines which have under-performed in recent years including six mines in West Virginia, and one in Kentucky. The company sold several of its Appalachian mining properties to Blackhawk Mining in 2014. Ironically, Blackhawk Mining issued notices for more than 200 layoffs on the same day in two of its West Virginia mines.
Arch says that they expect its mining operations and customer shipments to continue uninterrupted throughout the reorganization process.
“Today’s announcement represents another significant step in our ongoing efforts to position the company for long-term success,” said John W. Eaves, Arch’s chairman and CEO. “After carefully evaluating our options, we determined that implementing these agreements through a court-supervised process represents the best way to solidify our financial position and strengthen our balance sheet. We are confident that this comprehensive financial restructuring will further enhance Arch’s position as a large-scale, low-cost operator.”
“Since the market downturn, we have taken many steps to enhance the efficiency of our operations and to strengthen our asset base,” Eaves continued. “As a result, all of our operating segments were cash flow positive during the first three quarters of 2015. We will continue to provide our customers with exceptional service as we move through this process, while maintaining and further reinforcing our position as an industry leader in safety, environmental stewardship and productivity.”
Following the announcement, the New York Stock Exchange (NYSE) began taking steps to delist the stock (ACI) from the stock exchange. The NYSE Regulatory body determined that Arch is no longer suitable for listing. The decision came in light of the companies moves into the bankruptcy courts.
The existing common stock of Arch is set to be extinguished, and existing equity holders will not receive any consideration for their equity.
Meanwhile, the company states that they believe they have sufficient liquidity to continue their normal mining activities and to meet its obligations in the ordinary course.
Arch Coal has filed various motions with the Bankruptcy Court in support of its reorganization. The company says they intend to continue to pay employee wages and provide healthcare and other benefits without interruption in the ordinary course of business and to pay suppliers and vendors in full under normal terms.
Additional information is available on Arch’s website at www.archcoal.com/restructuring or by calling Arch’s Restructuring Hotline, toll-free in the U.S., at 1-844-242-7478.
According to CoalAge.com, a web platform for Mining Media International, Kentucky mining dropped 16.8 percent in 2015, down from 70,915 tons in 2014 to just 58,976 tons mined in 2015. It was the second highest drop nationally behind only Texas.
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