One of America’s largest coal companies is running out of options after a judge ruled against a move by the company that would have reduced its debt and interest payments.
Arch Coal had hoped to improve its balance sheet with a debt swap deal. But last week a New York judge denied the company’s request to protect the deal, instead siding with a group of lenders who want to block it.
Arch Coal has mines in the East as well as in Wyoming and Colorado. As the coal industry deals with a nation-wide downturn in the market, this debt swap deal for Arch was one way to avoid bankruptcy.
"It is a challenging environment both in the metallurgical coal and steam coal so there’s not a lot of new earnings that we can see on the horizon," Monica Bonar, Senior Director at Fitch Ratings, said.
In fact, Fitch recently reported that both Arch and coal company Peabody Energy have, "a reasonable likelihood of default." Defaulting on payments is generally the first step towards bankruptcy.