Arch CoalInc. has completed its financial restructuring and emerged frombankruptcy court protection.
Unlike competitor Alpha Natural Resources Inc., the Arch name will returnto the market with its top mines. The company will trade on the NYSE under theticker symbol ARCH. Some of Alpha's best assets are now housed atthe new entity Contura EnergyInc., while Alpha maintained less profitable operations.
"Today marks the for ArchCoal," said Arch CEO John Eaves. "We are extremely pleased with whatwe have accomplished during our highly expeditious restructuring process, andare eager to move forward with our compelling plan for value creation. I amconfident we have all the pieces in place for long-term success — anextraordinary workforce, cost-competitive assets, a high-quality reserve base,a clean balance sheet and an excellent management team."
Arch is one of the country's topproducers of metallurgical coal and maintains a large footprint in both easternand western U.S. coal basins. The company is emerging with $300 million of cash on its balance sheetand debt of $363 million consisting of a new term loan and capital leases —about 7% of the debt level prior to restructuring.
The company projected capitalspending of $55 million in 2017 and debt service of approximately $33 millionfor the year. The company also has third-party surety bonds in place covering100% of its reclamation bonding requirements.
Lucas Pipes, an analyst with FBR& Co., hailed Arch as the "New King Coal" in a note ahead of theannouncement. The research group just initiated coverage on the emergedcompany, ranking it "outperform."
"Arch Coal's new equity is emerging from a balancesheet restructuring that has left its low-cost operating assets unchanged:high-quality met coal production in the East and [Powder River Basin] thermalcoal exposure in the West," Pipes wrote. "In the course of therestructuring, the company right sized its balance sheet, eliminateduneconomical off-take agreements, and lowered production costs even further.While we always considered Arch a strong operator, we believe the company isnow positioned to prosper in almost any coal price environment."
Pipes recommended investors accumulate Arch equity"aggressively." Pipes noted that the company's exposure to improvingmetallurgical coal markets is likely to be the its greatest catalyst to furthergrowth, a sentiment shared in the Arch announcement Oct. 5.
"We are particularlypleased to be emerging in a resurgent metallurgical market, and look forward tosimilar strengthening in thermal coal markets in the months ahead," Eavessaid. "With our enhanced financial foundation and top-tier assets, webelieve we are exceptionally well-positioned to capitalize on both."
Major coal producer remains inthe process of bankruptcy reorganization.