Arch Coal announced Sept. 13 that, just over eight months after filing for Chapter 11, a judge at the U.S. Bankruptcy Court for the Eastern District of Missouri that day confirmed its Amended Plan of Reorganization.
Arch, one of the nation’s top coal producers, expects to emerge from bankruptcy in early October.
“The Court’s confirmation of our Plan is the final legal step in our successful financial restructuring,” said John W. Eaves, Arch’s CEO. “We will emerge as a strong, well-positioned natural resource company with a compelling plan for value creation. We have accomplished a great deal through the restructuring process and are confident that we have established a solid foundation for long-term success, built on our strong metallurgical and thermal franchises and our core commitment to safety and environmental excellence. We thank our customers and vendors for their important support, as well as our employees for their great dedication to Arch.”
The reorganization plan, which received overwhelming support from Arch’s creditors, incorporates and implements the terms of a global settlement agreement the company reached with certain of its senior secured lenders and the Official Committee of Unsecured Creditors. The plan eliminates more than $4.7 billion in debt from Arch’s balance sheet, significantly enhancing the company’s financial flexibility.
“We appreciate the cooperation of our lenders and creditors, as well as their advisors, who worked constructively with us to complete Arch’s financial restructuring in an expeditious and efficient manner,” Eaves said.
Davis Polk & Wardwell LLP is serving as legal advisor to Arch Coal, and PJT Partners is serving as financial advisor.
St. Louis-based Arch Coal is a top coal producer for the global steel and power generation industries. It is one of several top U.S. coal producers that has lately been working through bankruptcy protection. The biggest U.S. coal producer, Peabody Energy, is subject to a similar reorganization effort. Earlier this year, Alpha Natural Resources was split between two groups of creditors.
Environmental groups say Arch case provided important benefits
The Sierra Club and other environmental groups were claiming victory on Sept. 13, since the Arch Coal reorganization plan will require the company to replace all of its existing reclamation self-bonds with outside financial instruments to assure funding for required future mine site reclamation. The approved reorganization plan also leaves in place Arch Coal’s additional environmental obligations at its coal mines across the country, the groups noted.
The Sierra Club, Ohio Valley Environmental Coalition, and West Virginia Highlands Conservancy participated in the bankruptcy proceeding as parties in interest, represented by Earthjustice and Goldstein & McClintock LLLP, with Sierra Club also serving as co-counsel.
The groups said they plan to continue pursuing their two Clean Water Act enforcement actions against Arch Coal subsidiaries in West Virginia, represented by Appalachian Mountain Advocates. Those actions had been stayed during the company’s bankruptcy.
“Now that Arch Coal’s Chapter 11 plan recognizes our enforcement efforts can proceed, we will keep working to prevent further harm to the precious streams and other natural resources that West Virginians depend on being around for generations to come, for our enjoyment, and for our children, and grandchildren,” said Cindy Rank of the West Virginia Highlands Conservancy.
“Arch Coal’s commitment to replace its worthless self-bonds is a very positive development because it will ensure that funds will be available to clean up the company’s mines if it finds itself back in financial difficulty,” said Sierra Club staff attorney Peter Morgan. “To date, no company emerging from bankruptcy has been allowed to continue relying on the empty promise of self-bonding at any coal mines that have not already fully switched over to reclamation work.”
Said the club about the environmental particulars of the reorganization plan:
- Section 11.4 of the plan recognizes that environmental obligations are not released or discharged, and pending enforcement suits seeking injunctive relief to remedy and prevent harm under the Clean Water Act and Surface Mining Reclamation Act (SMCRA) may proceed in litigation on liability.
- The plan requires the company to promptly replace all $485.5 million in self-bonds for natural resource reclamation obligations in the Powder River Basin in Wyoming with more reliable financial assurances. The company has two mines in the Wyoming PRB, including Black Thunder, the nation’s second-largest coal mine.
- The plan’s recognition that Arch Coal must replace all self-bonds with more secure financial assurances is a further example illustrating why federal reform is needed to prevent self-bonding by coal companies, said the club, as the U.S. Office of Surface Mining Reclamation and Enforcement (OSMRE) has recognized in a new policy statement and initiation of a federal rulemaking under SMCRA.
- As a result of its reorganization, Arch Coal is relinquishing its 38% interest in a controversial coal-export terminal project in Longview, Washington (the Millennium Bulk Terminal), and has dropped plans for a related surface mining project in Montana’s Otter Creek valley.