Arch Coal abandons debt exchange offer: Update
The company also ended the support agreement it had signed with 57pc of noteholders who had not been eligible for the exchange.
The company is "in active dialogue" with creditors on restructuring its balance sheet, it said. Mining and shipping operations are continuing as normal.
Arch had been trying since 2 July to exchange notes due in 2019-21 for a smaller amount of new debt and cash that would be due in 2022-23. But a group of 50 lenders claiming to own more than half of Arch's first-lien-term loans had directed its administrative agent to withhold their consent from the exchange. A New York judge, on 16 October, declined one fund's request to stop the objecting Arch lenders from making further moves against the company's proposed debt exchange.
As a result of the objecting lenders' position, "the status of pending litigation, current market conditions and various other factors, Arch has concluded that the conditions to the exchange offer have not and will not be satisfied, and that the offers will not be consummated," Arch said.
After Arch's announcement, Fitch Ratings downgraded its ratings for Arch's senior secured revolving credit facility and its senior secured term loan to CCC-/RR2 from B-/RR2. It affirmed the company's issuer default rating at C and kept ratings on Arch's second-lien secured notes and senior unsecured notes at C.
"The downgrade reflects Fitch's view that a bankruptcy is more likely following the expiration of the exchange offers without executing a distressed debt exchange."
About \\$5.4bn in principal amount of debt and commitments is affected by Fitch's ratings.
While Arch had enough cash to make an interest payment on its debt earlier this month, the company is coming up against another nearly \\$90mn in aggregate coupon payments due on 15 December as well as \\$29mn in quarterly term loan principal and interest payment due on 31 December and \\$14mn in coupon payments due on 15 January, according to Fitch.
The company had \\$440mn in cash on hand as of 30 June, as well as \\$250mn in short-term investments and \\$123mn available under credit facilities.