Arch Coal Inc. terminated a debt-exchange offer that it initiated almost four months ago as disputes among creditors helped derail the deal that would have enabled the struggling coal miner to slash its $5.1 billion debt load.
The company, which had extended the deadline six times, said the decision was based on opposition from a lender group and a pending law suit, among other factors, according to a company statement Tuesday.
“Absent resolution of the litigation in favor of the plaintiff, Arch believes that the administrative agent is highly unlikely to execute the documentation required to consummate the exchange offers on their current terms,” the company said in the filing.
Arch shares plunged as much as 55 cents, or 27 percent, to $1.46 on Tuesday, the lowest since August 18. The stock inched up slightly to $1.63 at 10:55 a.m. in New York trading.
The $350 million 8 percent second lien notes maturing Jan. 2019 last traded at 8.5 cents on the dollar on Oct. 26, losing 47 cents this year, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The St. Louis-based miner, which is advised by Davis Polk & Wardwell, said it is continuing to talk to creditors about how to restructure its balance sheet.
The termination comes after New York judge Saliann Scarpulla earlier this month rejected a request by Blackstone Group LP’s GSO Special Situations Master Fund to halt attempts to stop the swap. Some holders of Arch’s $1.95 billion senior loan have been trying to block the deal due to concerns that the new debt would dilute their collateral on their loan.
The coal industry has suffered from a sustained low demand for the commodity as cheap natural gas eats into market share. This year alone, Walter Energy Inc., Alpha Natural Resources Inc. and Patriot Coal Corp. have filed for bankruptcy.
Peabody Energy Corp., the biggest coal miner in the U.S., is moving forward with its sale of “non-core assets” and plans to reduce its output in 2016, the company said on an earnings call Tuesday.