Arch Coal, the second-largest US coal producer, said early Monday it is filing for Chapter 11 reorganization after reaching 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.
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 said.
The St. Louis-based company said it expects its mining operations and customer shipments to continue uninterrupted throughout the reorganization process. The company owns thermal coal operations in the Powder River Basin, Illinois Basin and Appalachia. It also owns metallurgical coal assets in Appalachia.
"Today's announcement represents another significant step in our ongoing efforts to position the company for long-term success," John Eaves, Arch's chairman and CEO, said in the statement.
"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," he said.
Arch said that in order to facilitate this financial restructuring, it and substantially all of its wholly owned domestic subsidiaries filed on Monday voluntary petitions for Chapter 11 reorganization in the United States Bankruptcy Court for the Eastern District of Missouri.
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.
"Since the market downturn, we have taken many steps to enhance the efficiency of our operations and to strengthen our asset base," Eaves said.
"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."
The company said it believes it has sufficient liquidity to continue its normal mining activities and meet its obligations in the ordinary course.
Arch said it had 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 (DIP) financing from members of the ad hoc group of lenders on terms and conditions set forth in the DIP term sheet and DIP credit agreement filed with the bankruptcy court and contemplated by the restructuring support agreement among the company and the lenders.
In addition, Arch said it expects that its securitization financing providers will continue the company's $200 million trade accounts receivable securitization facility, subject to customary conditions, which supports Arch's letters of credit program.
Arch said that upon approval by the Bankruptcy Court and satisfaction of customary conditions, the proposed financings as well as the company's existing liquidity and cash generated from ongoing operations will be used to support the business during the restructuring process.
