Arch Coal recently filed its 10-K annual report with the Securities and Exchange Commission (SEC), which offered additional details on its operations during 2015 and its recent restructuring efforts.
Arch is one of the world’s largest coal producers. For the year ended Dec. 31, 2015, Arch sold an estimated 128 million tons of coal, including approximately 1.4 million tons of coal it purchased from third parties, Arch said in the March 15 filing.
As the end of the year, Arch operated or contracted out 16 active mining operations located in the major coal mining regions in the United States.
On Jan. 16, 2016, Arch and virtually all of its domestically-owned subsidiaries, together with Arch debtors, filed voluntary petitions for Chapter 11 bankruptcy reorganization.
The case, In re Arch Coal, Inc., et al. Case No. 16-40120, in the U.S. Bankruptcy Court for the Eastern District of Missouri. “As a result of extremely challenging current market conditions, Arch believes it will require a significant restructuring of its balance sheet in order to continue as a going concern in the long term,” Arch said in 10-K.
Arch entered into a Restructuring Support Agreement on Jan. 10 among the debtors and holders of over 50% of Arch’s first lien term loans. The Restructuring Support Agreement, if utilized as the basis for a plan of reorganization, is expected to reduce Arch’s long-term debt by more than $4.5bn.
Arch entered into an amendment to the Restructuring Support Agreement on Feb. 25.
The RSA Amendment “provides for the waiver of the termination event that would have occurred on February 25, 2016 as a result of the Debtors not having obtained Court approval of the assumption of the Restructuring Support Agreement within 45 days of the Petition Date. The Debtors had previously agreed, with the consent of the Majority Consenting Lenders under the Restructuring Support Agreement, to adjourn the Court hearing on the Restructuring Support Agreement at the request of the official committee of unsecured creditors appointed in the Debtors’ Chapter 11 cases. Pursuant to the RSA Amendment, unless otherwise agreed by the Majority Consenting Lenders, the Debtors are required to obtain Court approval of the assumption of the Restructuring Support Agreement on or before the date that is 90 days from the Petition Date.”
Arch then went on to say this about its Debtor-in-Possession (DIP) agreement:
“On January 21, 2016, the Super-priority Secured Debtor-in-Possession Credit Agreement, as amended by the Waiver and Consent and Amendment No. 1, dated as of March 4, 2016, (the “DIP Credit Agreement”) was entered into by and among the Company, as borrower, certain of the Debtors, as guarantors (the “Guarantors” and, together with the Company, the “Loan Parties”), the lenders from time to time party thereto (the “DIP Lenders”) and Wilmington Trust, National Association, as administrative agent and collateral agent for the DIP Lenders (in such capacities, the “DIP Agent”).
“The DIP Credit Agreement, which has been approved by the Court on a final basis, provides for a super-priority senior secured debtor-in-possession credit facility (the “DIP Facility”) consisting of term loans (collectively, the “DIP Term Loan”) in the aggregate principal amount of up to $275 million that may be funded in not more than two draws not later than six months after the effective date of the DIP Facility (such six month period, the “Availability Period”). Any portion of the DIP Term Loan commitment that has not been funded on or prior to the end of the Availability Period will be permanently cancelled,” Arch went on to say.
U.S. Steel, Southern, TVA among top domestic customers
Arch markets its steam and metallurgical coal to domestic and foreign utilities, steel producers and other industrial facilities.
“For the year ended December 31, 2015, we derived approximately 18% of our total coal revenues from sales to our three largest customers U.S. Steel, Southern Company and Tennessee Valley Authority – and approximately 39% of our total coal revenues from sales to our 10 largest customers,” Arch said in the filing.
“In 2015, we sold approximately 68% of our coal under long-term supply arrangements,” Arch said.
“At December 31, 2015, remaining tons under long-term supply agreements, including those subject to price re-opener or extension provisions, were approximately 144 million tons,” Arch said.