Arch Coal Files for Chapter 11 Bankruptcy Protection

In filings with a bankruptcy court, the St. Louis-based company says it has $6.5 billion in debt and $5.8 billion in assets. As part of Monday’s deal, lenders have agreed to support a restructuring transaction which will trim over $4.5 billion in debt from the coal company’s balance sheet.

Arch Coal, the second-largest USA coal miner and a key supplier to Minnesota utilities, filed for Chapter 11 bankruptcy protection on Monday with a plan to cut $4.5 billion in debt from its balance sheet in the midst of a prolonged downturn in the coal industry.

Arch, which has multiple mining operations in West Virginia, said it had enough operating capital and cash on hand to continue operating during the bankruptcy without interruption.

The company said it believes it has sufficient liquidity to continue its normal mining activities and to meet its obligations in the ordinary course. “We are confident that this comprehensive financial restructuring will further enhance Arch’s position as a large-scale, low-priced operator”.

To conclude its financial restructuring plan, Arch Coal and substantially all of its wholly-owned domestic subsidiaries have filed voluntarily petitions for reorganization under the Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri. The agreement will be subject to the approval of the bankruptcy court. The US Energy Information Administration (EIA) recently reported that gas-fired electricity generation surpassed that from coal-fired power plants for the first time in history in April 2015, before repeating the feat from July to October 2015 – the latest monthly data available.

The Company announced that it has reached an agreement with a majority of the lenders under its $1.9 billion first lien financing facility to significantly restructure its debt load.

Arch’s troubles are nothing new in the coal business.

The US coal sector has been hit by falling demand for its product on the back of low gas prices and tightening regulations.

Arch Coal’s move follows Chapter 11 filings by coal rivals Walter Energy Inc., Alpha Natural Resources Inc. and Patriot Coal previous year.