Arch Coal seeks court approval to sell or abandon low-value assets

The bankruptcy court for Arch Coal is due to hold a Feb. 23 hearing on a Feb. 9 motion from the company for permission to sell assets of less than $7.5 million in value without the need to seek court approval for each of those sales.

Arch Coal, one of the nation’s top coal producers, entered Chapter 11 protection on Jan. 11 at the U.S. Bankruptcy Court for the Eastern District of Missouri with a prepared plan to rework finances and to emerge largely intact.

In the Feb. 9 motion, it asked for approval to sell or publicly auction certain obsolete, surplus, burdensome or otherwise expendable assets having a transaction value of $7.5 million or less where such sale is arguably outside the ordinary course of business. It also wants to abandon any de minimis assets with a book value of $5 million or less where a sale cannot be consummated at a price greater than the costs of such sale (taking into account costs of, among other things, interim storage, shipping and marketing).

For purposes of this motion, a sale shall include entry into exchange agreements that Arch enters into in the ordinary course of business, which involve swapping non-strategic coal mineral rights or other assets for cash, other assets or coal mineral rights, that are strategic to the Arch operations. These sale procedures will not apply to any transaction covered by any order authorizing the Arch companies, in the ordinary course of their businesses, to enter into and perform under contracts with customers to sell coal from the their mining operations or acquired from other sources.

Also at the Feb. 23 hearing, the court is due to hear another Feb. 9 motion from Arch Coal, this one seeking approval of procedures for the rejection of executory contracts and unexpired leases and the abandonment of personal property.

Said the motion: “The Debtors are party to a number of Contracts and Leases, including Leases for equipment, office space, personal property, real property, wheelage rights and coal reserves as well as service contracts and contracts to sell coal and to purchase coal. In addition, the Debtors are party to a number of Contracts to purchase, among other things, mining supplies and other materials that support their operations. Each of these Contracts and Leases represents a liability for the Debtors. Some of these liabilities far outweigh the benefit they provide to the Debtors’ estates, while others are balanced by their attendant benefit.

“With the commencement of these chapter 11 cases, the Debtors’ personnel and professionals are focusing substantial attention on furthering the bankruptcy process and pursuing a reorganization. In doing so, as an ongoing component of the chapter 11 process, the Debtors will be actively evaluating the economic value of each Contract and Lease. Where appropriate, and in the ordinary course of their businesses, the Debtors will (and, indeed, have already begun to) work diligently with their Counterparties to negotiate new agreements that are more compatible with the Debtors’ current needs and resources. However, with respect to some Contracts and Leases, the Debtors will inevitably not be able to structure a suitable arrangement and, for these Contracts and Leases, rejection will be the only appropriate option.”

The company added: “The Procedures expedite the rejection process by eliminating the necessity for a hearing on uncontested rejections of Contracts and Leases and abandonment of Expendable Property. However, the Procedures fully protect and preserve the rights of Counterparties to receive sufficient notice of the Debtors’ intentions and to have an opportunity to object and be heard within a reasonable period of time on the proposed rejections.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.