Monday, January 11, 2016

Arch Coal Files for Bankruptcy; Coal Default Rate at ‘Unprecedented’ 43% (ACL; KOL)

KOL is the coal ETF.
Someone will be accumulating these assets.

From Income Investing:
After prolonged efforts to avoid bankruptcy, Arch Coal (ACI) filed Chapter 11 on Monday.

It is defaulting on $3.2 billion of debt, according to Fitch Ratings, bring the metals and mining sector’s trailing 12-month default rate to 15% from 11% at the end of December. The default rate for the coal subsector is 43%, a level Fitch calls “unprecedented.”

Arch also announced it has eliminated $4.5 billion in debt from its balance sheet by renegotiating with some of its biggest creditors.

The plan gives senior lenders most of the equity and some debt. Junior bondholders are expected to receive very little in recovery. The Wall Street Journal sums up the restructuring proposal:

In broad outline, Arch is proposing a debt-for-equity swap that would leave most of the company in the hands of the first-lien lenders, while unsecured creditors owed billions would be offered options, including a share of 4% of the equity in the reorganized coal company.

Coal companies Patriot Coal, Walter Energy and Alpha Natural Resources have already filed for bankruptcy in the past year. Fitch explains:...MORE