Most American coal producers are burning cash in the current weak market. They’re conserving liquidity through various means to ensure they survive the downturn. This is especially true for highly leveraged players because they have limited abilities to issue new debt if they run out of resources.
Arch Coal (ACI) is one of these players, and the company had around $5.2 billion of debt on its books as of March 31, 2015. However, the company still has time on its side, as there are no major maturing obligations until 2018. That year, $1.9 billion of debt matures, followed by $1.7 billion in 2019, $500 million in 2020, and $1.1 billion in 2021.
The debt level has remained relatively steady since December 31, 2013. Instead of borrowing more, the company is focused on utilizing available liquidity to cover its cash losses.
Arch Coal’s liquidity position
Arch Coal’s cash balance dropped to $690 million as of March 31, 2015, from $734.2 million as of December 31, 2014. The cash position dropped due to adverse moments in working capital. The company holds another $249 million in liquid securities. As of March 31, 2015, it had available liquidity of more than $1 billion.
Other coal producers (KOL), especially highly leveraged producers such as Alpha Natural Resources (ANR), Peabody Energy (BTU), and Walter Energy (WLT) have also shored up huge liquidity to survive the downturn. Companies such as Cloud Peak Energy (CLD) and Westmoreland Coal Company (WLB), who refrained from aggressive acquisitions, enjoy cleaner balance sheets. All major American coal producers are part of the iShares Russell 3000 ETF (IWV).