American coal giant has declared Chapter 11 bankruptcy as the coal price tumbles and it seeks to cut its US$.45 billion debt load.
It comes as the miner reached an agreement with the majority of lenders under its US$1.9 billion first lien to restructure the company’s debt load.
As part of this financial restructuring, “Arch and substantially all of its wholly-owned domestic subsidiaries have today filed voluntary petitions for reorganisation under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri,” the miner said in a company statement.
“The company and the ad hoc group have agreed to the principal terms of a Chapter 11 plan of reorganisation, which will be subject to approval by the Bankruptcy Court.“
Late last year fellow US coal major Alpha Resources also filed for Chapter 11, entering bankruptcy “to enhance the company's future as it weathers a historically challenged coal market”.
“The relief provided by Chapter 11 will allow the company to reorganise and emerge as a financially viable business that is better positioned to compete in dynamic energy markets,” Alpha said at the time.
This line is being echoed by Arch Coal.
"Today's announcement represents another significant step in our ongoing efforts to position the company for long-term success," John W. Eaves, Arch's chairman and CEO, said.
"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."
Arch believes that despite declaring bankruptcy, it still has enough liquidity to continue normal mining activities and meet its obligations.
“Arch 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,” the miner stated.