Arch Coal Files for Chapter 11 Bankruptcy

Arch Coal files for Chapter 11 bankruptcy

Arch Coal Inc. (NYSE: ACI) filed for Chapter 11 bankruptcy and reached an agreement to restructure the company’s debt load.

Arch and substantially all of its wholly-owned domestic subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy court for the Eastern District of Missouri. This was done to facilitate the restructuring support agreement with members of an ad hoc group of lenders that hold more than 50 percent of the company’s $1.9 billion in first-lien debt. Under 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 offer some recovery to unsecured creditors.

The company missed the December 15 deadline to make a $90 million interest payment, and had entered into a 30-day grace period. During that grace period, Arch was in discussion with creditors to restructure it debt.

“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,” said John W. Eaves, chairman and CEO of Arch coal. “We are confident that this comprehensive financial restructuring will further enhance Arch’s position as a large-scale, low-cost operator.”

Arch said it expects its mining operations and customer shipments to continue uninterrupted throughout the reorganization process. The company said it has more than $600 million in cash and short-term investments as of January 11, 2016, and expects to receive $275 million in debtor-in-possession financing from members of the ad hoc group. Davis Polk & Wardwell LLP is serving as legal advisor to Arch Coal, and PJT Partners is serving as financial advisor.

Bob LeResche, chair of the Powder River Basin Resource Council, said Arch Coal should not put its debts off on taxpayers.

“Bankruptcy should not be used as a haven for the company to escape its obligations,” LeResche said. “With over ninety square miles of coal mines in Wyoming’s Powder River Basin, Arch has a $458 million reclamation liability. State and federal taxpayers must not be left with the bill.”

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