Arch Coal expects to file for bankruptcy protection within months

Arch Coal, Inc.is a coal producer, which sells all of its coal to power plants, steel mills and industrial facilities.

Offering a possible hint at the company’s bankruptcy filing, Arch wrote that its creditors would recover little of their investment if it seeks Chapter 11 protections.

“Arch will require a significant restructuring of its balance sheet to continue to operate as a going concern over the long-term”, said its Chief Financial Officer, John Drexler, in its 3Q15 results.

Arch Coal (NYSE:ACI) sharply reversed strong opening gains to end regular trading 6.6% lower, and shares are down another 1.2% AH, as fears grow that it could follow coal mining peers into bankruptcy in the near term even if current talks with creditors yield a restructuring agreement.

Competitors such as Walter Energy, Alpha Natural Resources and Patriot Coal have all filed for bankruptcy this year. Since then, the price of metallurgical coal has crashed to less than half of its all-time high – and Arch believes it may have further to fall. The firm earned $688.50 million during the quarter, compared to analysts’ expectations of $678.63 million. Vetr cut Arch Coal from a “strong-buy” rating to a “buy” rating and set a $4.48 price objective on the stock.in a research report on Monday, October 19th. Arch said it anticipates USA coal demand will fall by 95 million tons in 2015. The oversupplied market for metallurgical coal probably won’t get any better until more production is shut down, the company said.

Revenue fell to $688.5 million in the third quarter from $742.2 million, which beat the $688.3 million average estimate.

However, Mr. Eaves warned investors of the outlook, adding that: “Despite these efforts, however, the hard conditions impacting the coal industry persist, and we expect they will continue throughout 2016”.

Arch may use more than $600 million of its cash to run its operations in 2015 and 2016, Jeremy Sussman, a New York-based analyst at Clarksons Platou Securities Inc., said in an October 14 note.