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Murray Energy secures forbearance agreement after missing debt payment

Murray Energy Corp., the largest privately held coal producer in the U.S., entered into forbearance agreements to allow the company time to continue discussions with its lenders about various strategic options and hold off any consequences from an event of default resulting from not making amortization and interest payments due Sept. 30.

The agreement, announced Oct. 2, was struck between Murray Energy and lenders holding more than 50% of outstanding loans under its superpriority credit and guaranty agreement and with lenders holding in excess of 50% of outstanding loans under its asset-based lending and first-in, last-out credit facilities. The company said it elected not to make amortization and interest payments due Sept. 30.

The forbearance period extends through Oct. 14. Murray Energy said the deal is expected to give it the opportunity to "strengthen the company's business, improve its liquidity position, deleverage its balance sheet, and achieve a more sustainable capital structure."

S&P Global Ratings downgraded Murray Energy from CCC+ to CCC in late August, citing the potential of the company pursuing a debt restructuring within 12 months due to a deep discount on its secured debt. A long-term secular decline in domestic coal demand has long weighed on U.S. coal producers and recently strong export markets have been deteriorating.