Nervous investors in Arch Coal Inc. are blocking a deal to exchange nearly $2.4 billion in bonds for new loans with later maturity dates, a move that would have allowed the ailing company to “cut its obligations and ride out a commodities slump,” Bloomberg reports.
In response, some of Arch’s senior lenders are pressuring the company to ignore a $18.1 million interest payment that is due in two weeks. “That would start the clock on a 30-day grace period that would force the two sides to either reach a compromise or head to bankruptcy court,” Xu and Keller write.
“Creditors would rather the company not pay the interest because it cuts into their recovery,” even if the amount is relatively small, said Bloomberg Intelligence credit analyst Spencer Cutter. If the investors don’t think Arch can avert bankruptcy, “they’d rather the company file sooner than later.”
Bloomberg lists three other U.S. coal companies—Alpha Natural Resources Inc., Walter Energy Inc., and Patriot Coal—that have declared bankruptcy in the last three months. Arch “has been losing money since 2012, as demand for metallurgical coal used in making steel slowed due to China’s economic slump and the need for thermal coal dropped because of cheap natural gas.”