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Armstrong reaches agreement with creditors to restructure balance sheet


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Essential Energy Insights - October 2021

Armstrong reaches agreement with creditors to restructure balance sheet

Armstrong Energy Inc. reached an agreement in principle with its major creditors that will allow for a comprehensive balance sheet restructuring.

The coal producer announced Oct. 5 that the holders of $156 million in aggregate principal amount of the company's senior secured notes due 2019 intend to execute an additional forbearance agreement through Oct. 31.

Knight Hawk Holdings LLC is the supporting noteholder of the amount, representing about 78% of the outstanding principal amount.

Armstrong's primary mineral rights provider agreed to support the restructuring with a new go-forward royalty agreement related to its mineral rights, subject to final documentation, due diligence and approvals.

The coal producer expects to continue customer shipments and mining operations in the ordinary course during the restructuring process.

J. Hord Armstrong III, the company's executive chairman, said in a news release that "Armstrong has sufficient liquidity to continue normal operations during the restructuring process" and "this agreement in principle with our stakeholders follows months of intensive negotiations and is designed to both maximize creditor recoveries and strengthen Armstrong's balance sheet."

Armstrong filed a Form 15 with the SEC on Oct. 5 to immediately suspend its obligations to file periodic and current reports relating to its 11.75% senior secured notes due 2019. The coal producer missed a June interest payment as well as several other deadlines, the most recent being Sept. 29.

The company has been warning during earnings reports that it is likely to default on its debt and faces a real possibility of bankruptcy.

An analyst said an Armstrong bankruptcy could ease the tight Illinois Basin market.