Arch Coal Restructuring Plan Wins Court Approval -- Update
5:04 pm ET September 13, 2016 (Dow Jones) Print
By Jacqueline Palank
Arch Coal Inc. on Tuesday secured bankruptcy-court approval for a plan to cull nearly $5 billion in debt from its books and emerge from chapter 11 protection.
The U.S. Bankruptcy Court in St. Louis confirmed Arch's chapter 11 plan of reorganization, the company said, adding that it expects to exit bankruptcy protection in early October.
"We have accomplished a great deal through the restructuring process and are confident that we have established a solid foundation for long-term success," Arch Chief Executive John W. Eaves said in a statement.
The plan reduces Arch's debt load by about $4.7 billion and ensures that the company will be a "lean, mean, fighting machine for the coming era, which will remain challenging and complicated for the U.S. coal industry, " Arch bankruptcy lawyer Marshall Huebner said in court Tuesday.
Unsecured creditors including bondholders will get $30 million in cash and 6% of the new shares, court papers say. Bondholders also get to choose between warrants to buy up to 12% of Arch's new common shares or $25 million in additional cash. All of the stock distributions are subject to dilution by the warrants and a management incentive program.
Current shareholders will be wiped out under the plan.
The current plan is the product of settlement talks with junior creditors, who had threatened litigation in connection with Arch's prior restructuring efforts.
"Getting here today was not without its challenges," Mr. Huebner told the court, according to an audio recording of Tuesday's proceedings posted to the court docket.
The plan ultimately carried broad support from Arch creditors -- according to Mr. Huebner, more than 96% of creditors who cast ballots on the plan voted in favor -- but drew an objection from a federal bankruptcy watchdog.
The watchdog, U.S. Trustee Daniel J. Casamatta, had filed papers opposing the plan's liability releases for the lawyers and advisers to various Arch creditors. Judge Charles E. Rendlen III overruled that objection Tuesday, pointing to the consensual nature of the plan.
"The Arch plan is actually a model of negotiation and people actually getting along," the judge said. "There's no reason not to approve this plan."
Days before Tuesday's court hearing, Arch revised its restructuring plan to include a pledge of additional assurance of its ability to cover environmental liabilities at its mines in Wyoming, where it is one of the biggest coal mining companies in the Powder River Basin.
Before its bankruptcy, Arch had posted $485 million in self-bonds to cover mine cleanup costs in the state. Self-bonds aren't backed by insurance or collateral, making them a cost-effective option for miners but potentially troublesome when a miner runs into financial problems.
The amended plan provides for Arch, within 15 days of exiting bankruptcy, to replace all of its self-bonds in Wyoming with bonds backed by insurance, cash or other collateral. Wyoming is the only state where Arch has self-bonds, court papers say.
St. Louis-based Arch mines for coal in Colorado, Illinois, Kentucky, Maryland, Virginia, West Virginia and Wyoming. The company sought chapter 11 protection in January after a failed effort to restructure its debts outside of bankruptcy court. It was one of several major coal producers -- such as Alpha Natural Resources Inc. and Peabody Energy Corp. -- to file bankruptcy to address a heavy debt load amid troubled coal markets.
Write to Jacqueline Palank at jacqueline.palank@wsj.com
(END) Dow Jones Newswires
September 13, 2016 17:04 ET (21:04 GMT)
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