US coal producer Arch exits Chapter 11OREANDA-NEWS. October 06, 2016. Arch Coal has exited Chapter 11 bankruptcy protection with just a fraction of the debt it had going in.

Arch, the second-largest US coal producer based on volume, is completing its restructuring with \\$363mn in debt, just 7pc of what it had when it filed for Chapter 11 in January. It has \\$300mn cash on its balance sheet.

Unlike recent predecessors in the Chapter 11 process such as Alpha Natural Resources and Walter Energy, Arch is emerging from court-supervised restructuring proceedings essentially intact, but without the \\$5.15bn it was struggling to service when coal prices and demand plummeted in 2014-15. The company expects to have "modest" cash requirements in the near future, including \\$55mn of capital spending in 2017 and projected debt service of \\$33mn.

The company also is exiting Chapter 11 at a better time for the industry than when it entered in January. Metallurgical coal prices have soared in recent weeks amid steady demand in Asia and concerns about tight supply. Thermal coal markets in the US are also turning around.

"I am confident we have all the pieces in place for long-term success," chief executive John Eaves said. "We are particularly pleased to be emerging in a resurgent metallurgical market and look forward to similar strengthening in thermal coal markets in the months ahead."

The company's new shares, trading on the New York Stock Exchange under the ticker symbol ARCH, ended today at \\$63.

The US' largest metallurgical coal producer, Arch said last week that it expects to produce 7mn-7.5mn short tons of coking coal in 2017, roughly in line with what it is on track to sell this year. The company emphasized that 6.4mn st of the coking coal that it intends to produce in 2017 is not yet contracted and exposed to rising prices.

The company expects domestic and international metallurgical coal markets to continue to improve over the next few years and is looking to make small, low-cost incremental increases in output at its high-volatile type A mines, including upgrades to its Sentinel operation that are expected to increase output by 50,000st.

Arch said a wider-spread rebound of US coking coal production is unlikely because many of the mine closures that have been implemented in recent years were permanent. Continuing capital constraints for all major mining firms is a restriction on any swift rise in supply, it said.

The company also expects thermal coal markets to recover but not fully regain losses. Power plant stockpiles likely will end the year at 149mn st, or 77 days' supply, down from 197mn st, or 107, in December 2015. While that is a significant improvement, it still leaves room for more inventory liquidation early next year, Arch said last week.

Arch estimates US coal consumption could regain some of the 150mn st of market share it has lost to natural gas but probably will not regrow any position lost to renewables. It projected last week that total Powder River basin production, which typically has the lowest sulfur in the US, will rise to 300mn-350mn st next year, from around 300mn st in 2016, with most of the growth coming from higher heat-content coal in the basin. The company said output from its Black Thunder mine is approaching 9,000 Btu/lb and "is particularly well positioned" for sales growth once power plants finish working through excess stockpiles.

Arch said last week that it had sold 47mn st of PRB coal through August and 108.5mn st in 2015. The company shipped a total of 57.6mn st in the first eight months of 2016 and 127.6mn st in all of last year.

Arch did make some concessions to exit Chapter 11. It agreed in September to completely replace self-bonded obligations in Wyoming. After the restructuring, the company holds \\$550mn in surety bond liabilities in the US, including \\$415mn in Wyoming.