Arch Coal, Inc. has announced that the United States Bankruptcy Court for the Eastern District of Missouri has confirmed its amended plan of reorganization. The coal mining giant now expects to formally emerge from bankruptcy in early October. This was a long painful process for its common shareholders, and the company said that this approval comes just over eight months after originally filing for Chapter 11. Still, this looks like one of those instances where the old equity holders will get zero interest in the new company.
The reorganization plan was said to have received overwhelming support from Arch’s creditors. It was also shown that it incorporates and implements the terms of a global settlement agreement the company reached with certain senior secured lenders and with the official committee of unsecured creditors. Arch went on to point out that the reorganization plan effectively eliminates more than $4.7 billion in debt from the corporate balance sheet.
Despite being one of the top U.S. coal producers for the steel and power generation industries, and among the giants in the Powder River Basin, even the mighty Arch Coal could not escape the pressure put on the this sector in recent years.
Prior to its bankruptcy, Arch posted $485 million in self-bonds to pay for mine cleanup and remediation costs in Wyoming. Those bonds are not generally insured, so bankruptcy can pose a challenge. It appears as though Arch will have to replace those bonds with insured bonds after exiting bankruptcy protection.
Senior creditors, who are owed roughly $1.9 billion, will receive cash, another $326.5 million issued in new senior debt, and they will receive about 94% of the common shares in the NewCo after bankruptcy. Arch’s unsecured creditors will receive the other 6% of the common equity and $30 million in cash.
As we see with most bankruptcies, the old common holders appear to be receiving nothing in the new company. The old remaining equity is listed under the “ACIIQ” stock ticker on the OTC market, but used to trade as “ACI” on the New York Stock Exchange.
John W. Eaves, Arch’s CEO, said:
The Court’s confirmation of our Plan is the final legal step in our successful financial restructuring. 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.
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.
Arch operates in the states of Colorado, Illinois, Kentucky, Maryland, Virginia, West Virginia and Wyoming. Arch was far from the only coal miner and producer that succumbed to bankruptcy. Even Peabody Energy and Alpha Natural Resources cratered with heavy debt and seriously diminished end-user domestic markets for coal.