Arch Coal (NYSE: ACI) said Jan. 12 that it has received approval from the U.S. Bankruptcy Court for the Eastern District of Missouri for all of its first day motions related to its Chapter 11 restructuring.
Collectively, the first day orders issued by the court on either an interim or final basis will help Arch continue operating its business in the ordinary course as it implements the agreements it reached with the majority of the lenders under its $1.9 billion first lien financing facility to significantly restructure the company’s debt load.
“These approvals represent a positive step forward in our financial restructuring process,” said John W. Eaves, Arch’s chairman and CEO. “With these approvals, Arch will continue normal operations as we implement a comprehensive financial restructuring that will further enhance Arch’s position as a large-scale, low-cost operator. We will continue providing our customers exceptional service as we move through this process, and we will continue to operate safely, responsibly and efficiently.”
The court granted Arch interim approval of a $275 million debtor-in-possession (DIP) financing it expects to receive from members of the ad hoc group of lenders that hold more than 65% of the company’s first lien debt. The court also granted interim approval for the company to continue its $200 million trade accounts receivable securitization facility, which is subject to customary conditions and supports Arch’s letters of credit program. In addition, the company had more than $600 million in cash and short-term investments as of Jan. 11, 2016. Together, with cash generated from ongoing operations, the company’s new financing and existing liquidity will be used to support the business during the restructuring process.
The company also received approval to, among other things, pay employee wages, salaries, benefits and certain other employee obligations, as well as use existing cash management systems. The company also received approval to take certain other actions to help ensure that Arch’s mining operations and customer shipments continue in the ordinary course. Arch intends to meet its obligations in the ordinary course and expects its mining operations and customer shipments to continue uninterrupted throughout the reorganization process.
On Jan. 11, Arch reached an agreement with a majority of the lenders under its $1.9 billion first lien financing facility that will eliminate more than $4.5 billion in debt from Arch’s balance sheet. To facilitate this financial restructuring, Arch and substantially all of its wholly-owned domestic subsidiaries on Jan. 11 filed voluntary petitions for reorganization under Chapter 11.
St. Louis-based Arch Coal is one of the world’s top coal producers for the global steel and power generation industries, serving customers on five continents. Its network of mining complexes is the most diversified in the United States, spanning every major coal basin in the nation. The company controls more than 5 billion tons of high-quality metallurgical and thermal coal reserves, with access to all major railroads, inland waterways and a growing number of seaborne trade channels.
Arch Coal is the latest in a series of coal companies to seek bankruptcy in the face of a prolonged slump in the coal market and the closure of dozens of coal-fired power plants in the U.S. Others in bankruptcy include: Patriot Coal, which had its parts sold off; Walter Energy, which is in the process of being sold; and Alpha Natural Resources, which is trying to reorganize around a core of operations but plants to sell of a number of properties.