Arch Coal Inc (NYSE:ACI)’s Railroad Project Hits Roadblock


A slew of issues continues to surround Arch Coal Inc (NYSE:ACI) as its joint project; Tongue River Railroad Co. came to a standstill following its suspension. The project is currently undertaken jointly by BNSF Railway, Arch and a limited liability financing company. It is disclosed that $400 million railroad meant to transport coal from a proposed mine owned by the company has been suspended for lack of permits and weak coal market.

Permit and coal prices are concern

The suspension plans will defeat the Tongue River Railroad’s target production date of January 2017. Given the delay in mine permits and near-term coal market weakness, it is less likely that the company will look to complete the railroad project within the scheduled timeline. At present, Arch Coal Inc (NYSE:ACI) has not yet withdrawn its application, while BNSF has expressed renewal hopes once mine permit is issued by Montana and the ongoing lawsuits are settled.

Arch Coal Inc (NYSE:ACI) has received another setback from the research firm, UBS, which has downgraded its outlook on the company. The research firm has given a Sell rating to the company and has trimmed its price target by 67% to $0.50. The rating downgrade is based on the view that the U.S. coal players will witness a late recovery in gas prices. It projected that the coal companies even with healthier balance sheets are likely to suffer cash burn and will see diminished coal purchases from the utilities.

Debt fight

Meanwhile, the company’s second-tier bondholders have hired Brown Rudnick law firm to prevent the company from implementing its restructuring plan involving $5.1 billion of debt. The creditors hold the company’s second-lien bonds worth $350 million of 8%, which can be serviced only after the payments amounting $1.9 billion are made to first-lien loan owners.

The stock price of the company fell by 0.81% to close the previous day’s trading session at $1.23.