Arch Coal wins critical approval for in-bankruptcy financing

The bankruptcy judge for Arch Coal on Feb. 25 approved a key to the company being able to maintain coal operations for the time being, with that approval covering an Arch Coal request to obtain post-petition, debtor-in-possession financing (called the “DIP Financing”), including a delayed-draw term loan (the “DIP Loans”) in the aggregate principal amount of $275 million from a syndicate of financial institutions.

The order out of the U.S. Bankruptcy Court for the Eastern District of Missouri includes authorization for Arch and its subsidiaries to execute and enter into a certain Superpriority Secured Debtor-in-Possession Credit Agreement with parties called the “Guarantors” and the “DIP Lenders, and Wilmington Trust NA, acting as administrative agent and collateral agent.

Arch Coal told the bankruptcy court in a Feb. 22 brief that this DIP financing package, which will provide it with money to operate during this bankruptcy proceeding, is the best financial option for the company, despite the objections of various parties.

Arch and its subsidiaries said: “The Debtors seek final approval of an arms’-length, heavily negotiated DIP financing and adequate protection package, which includes a superpriority, priming lien debtor-in-possession financing (the ‘DIP Financing’), consisting of a $275 million delayed draw term loan facility, as well as the consensual use of the collateral of the prepetition secured lenders (‘Secured Lenders’), including cash collateral (‘Prepetition Collateral’).

“The DIP Financing will enable the Debtors to continue their operations during chapter 11 and will assure stakeholders of the Debtors’ ability to restructure expeditiously, all in the face of unprecedented, continued declines in the coal market. As set forth in detail herein and in the DIP Motion, the DIP Financing is an appropriate exercise of the Debtors’ business judgment, approval of the DIP on an interim basis has already assisted the Debtors, and the Court should approve the Final Order in its entirety.”

St. Louis-based Arch Coal filed for Chapter 11 protection on Jan. 11, saying it had already worked out a financial arrangement with lenders that should get it out of bankruptcy quickly and largely intact. It is one of the nation’s largest coal producers.

The judge on Feb. 25 also issued an order approving a Feb. 9 request by Arch to reject several contracts that the company said are weighing on its finances. That includes a 2012 coal transportation agreement with the BNSF Railway/Kansas City Southern Railway held by Arch Coal Sales, a 2013 rail transportation deal with CSX Transportation held by Arch Coal Sales, and a 2012 rail transportation deal between Arch Coal Sales and the Union Pacific Railroad.

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.