Arch Coal Inc., the holder of the second-largest reserve of coal in the U.S., filed for Chapter 11 bankruptcy protection Monday, becoming the latest coal producer to be hit by the U.S.'s shift toward cheaper, cleaner-burning natural gas.
The Missouri-based company has been saddled with debt ever since its $3.4 billion acquisition of International Coal Group in 2011. Though the purchase came at the peak of coal prices, a subsequent drop in demand from China, competition from Australian exports and cheap gas has left Arch hemorrhaging money ever since, according to Bloomberg.
In it's filing, the company said it reached a deal with a majority of its lenders to erase $4.5 billion of it's $6.5 billion debt.
Filing for Chapter 11 bankruptcy protection allows companies to continue operating while working to reorganize their debt. In accordance with that, the company said its mines will remain open and workers will continue getting paid and even retain benefits such as health care and retirement plants, according to ABC News.
Monday's filing followed unsuccessful efforts to avert bankruptcy through a debt exchange designed to postpone the maturity of Arch bonds. The effort would have had the coal producer exchange its outstanding debt notes for ones with longer maturity and lower coupon rate. However senior creditors didn't support the move, which would have had to assume greater risks and lower returns.
This failure prompted warnings from Arch in November that it could be forced to file for Chapter 11 Protection.
"Given how hard it has been to negotiate any deal, especially with senior lenders who seem to want control of the company, it is not surprising that Arch will have to file for Chapter 11 soon," an analyst said at the time, according to Reuters.
Arch Coal is the latest in the coal industry to declare bankruptcy. Patriot Coal Corp., Walter Energy Inc., and Alpha Natural Resources Inc., all went into bankruptcy in 2015, and the largest U.S. coal producer, Peabody Energy Corp., hit a record low on Monday and is still down 19.64 percent in afternoon trading.
