Arch Coal has elected not to make a $90 million interest payment due to bondholders today as it continues discussions with various creditors “in an effort to implement a comprehensive plan” to restructure its balance sheet, the company announced today.
America’s second-largest coal miner will instead enter into a customary 30-day grace period with holders of the 9.875% notes due 2019, the 7.00% notes due 2019, and the 7.25% notes due 2021, after the company was forced to cancel its proposed exchange offer with the junior lenders that it said was “the best option” for keeping the deeply distressed miner out of bankruptcy.
Arch Coal further disclosed that events of default will exist under the company’s term loan facility and receivables facility as a result of the missed interest payment and other recent events, but does not anticipate the lenders taking any remedial action in respect of any such event of default.
As reported, Arch Coal, which is saddled with a $5.1 billion debt load from its $3.4 billion acquisition of International Coal Group Inc. in 2011 and three consecutive annual losses, said in its quarterly earnings announcement that it will require a “significant restructuring” of its balance sheet if it is to continue to operate as a going concern, and further warned that it may file for Chapter 11 protection in the “near term.”
Arch Coal’s covenant-lite term loan due 2018 (L+500, 1.25% LIBOR floor) is quoted little changed at around 45/47. There is about $1.88 billion outstanding under the term loan as of Sept. 30, SEC filings show. Wilmington Trust is administrative agent.
Arch Coal 7% notes due 2020—the main notes targeted in the failed exchange offer—have not traded this morning, though the notes were recently in and around a near-worthless one cents on the dollar.
The St. Louis–based company ended the Sept. 30 quarter with liquidity of $704.4 million—$694.5 million of that was composed of cash and liquid securities.
The coal market has been dealt a devastating blow over the past couple of years as historically low coal prices, increased competition from natural gas, and environmental regulation has had a considerable impact on liquidity-constrained issuers in the coal sector. Those that have filed for Chapter 11 in the past six months include Alpha Natural Resources, Walter Energy, and Patriot Coal.
Foresight Energy last week received a written notice of default from the administrative agent on behalf of lenders under its revolving credit agreement, as a result of the previously announced opinion of the Delaware Chancery Court, the company announced late today. — Rachelle Kakouris