DEBTWIRE BROADCAST:
ARCH COAL VALUATION AND LEGAL ISSUES UP FOR DISCUSSION
AT DEBTWIRE ROUNDTABLE
Debtwire’s team of journalists and analysts will recap Arch’s first day hearing and explore a variety of topics, including plan and valuation issues, unsecured bondholders’ legal options and game theory, as well as the company’s reclamation burden. | 13 January 2016

1.
Opening Remarks: Kate Marino, Deputy Editor
Kate.Marino@Debtwire.com
2.
The Descent: Madalina Iacob, Associate Editor & Energy Reporter
Madalina.Iacob@Debtwire.com
3.
First Day Hearing: Maria Chutchian, Court Reporter
Maria.Chutchian@Debtwire.com
4.
Financial Analysis: Thomas Rorick, Distressed Analyst
Thomas.Rorick@Debtwire.com
5.
Court Case: Joshua Friedman, Legal Analyst
Joshua.Friedman@Debtwire.com
6.
Q & A
2

 Arch’s Chapter 11 filing was precipitated by the collapse in coal prices, alongside low natural gas prices.
 Management takes steps to right-size the balance sheet by selling assets, amending covenants and swapping unsecured debt.
 The proposed debt exchange stirs a war of letters, followed by litigation, between bondholders, first lien lenders and the company.
 Arch cancels the debt exchange, and three months later files with a USD 275m DIP and a plan backed by lenders.
3




4

USD m, where applicable
DIP Term Loan
1
New First Lien Debt 2
First lien term loan 3
A/R securitization facility
4
Second lien notes
Total secured debt
Senior unsecured notes
Senior unsecured notes
Senior unsecured notes
Senior unsecured notes
Total debt
Less: cash and cash equivalents 5
Net debt
Equity market capitalization 6
Enterprise value
2016P EBITDA
Coupon
L+ 9.00%
L+ 9.00%
L+ 5.00%
-
8.00%
7.00%
9.875%
7.25%
7.25%
73
PRO FORMA ADJUSTED CAPITAL STRUCTURE
Face Amount Market Amount
375
500
1,000
5,289
591
4,698
9
4,707
275
-
1,886
178
350
2,414
1,000
4
3
8
911
591
320
9
328
275
-
704
178
7
889
8
Adj.
(275)
327
(1,886)
-
(350)
(1,910)
(1,000)
(375)
(500)
(1,000)
(4,785)
(205)
247
Pro Forma
Face Amount
0
0
0
505
386
119
256
374
0
327
0
178
0
505
0
Price
-
2
-
1
-
-
37
1
1
1
Maturity
22 Sep 2016
Five Years
16 May 2018
8 Dec 2017
15 Jan 2019
15 Jun 2019
15 Jun 2019
1 Oct 2020
15 Jun 2021
2016PF
Face Leverage
-
4.5x
-
6.9x
-
-
-
-
-
6.9x
1.6x
5.1x
Obligations:
Asset Retirement Obligations
Worker's Comp
Other
Total
OBLIGATIONS (USD m)
Surety Bonds
681
20
58
758
L/Cs
41
112
7
160
Cash
8
11
-
19
1) The DIP Term Loan will mature on the earliest of a) 31 January 2017, b) effectiveness of a Plan of Reorganization, c) appointment of a trustee or d) sale of substantially all assets pursuant to Section 363. The DIP Term Loan is subject to a 1.00% LIBOR floor.
2) The New First Lien Debt will bear interest at Libor+ 900bps and is subject to a 1% Libor floor. The loan will mature in five years.
3) The term loan is subject to a 1.25% floor.
4) As of the petition date, USD 178m in letters of credit were outstanding under the A/R Securitization Facility. The L/Cs outstanding are secured by eligible accounts receivable and USD 97m of cash collateral. Arch Receivable Company, LLC, a special purpose, bankruptcy-remote indirect subsidiary of Arch, is party to the A/R securitization facility.
5) We assume the company has USD 386m in total cash at emergence based on the nine month restructuring scenario outlined in a lender presentation.
6) As an estimate of reorganized Arch's equity value, we use the market value of the second lien bonds and unsecured bonds as a proxy.
Sources: SEC Filings, Court Filings, Markit, MarketAxess.
5

USD m
CASH BUDGET (USDm)
Pre-
Petition
Post-Petition
8 Jan 15 Jan 22 Jan 29 Jan 5 Feb 12 Feb 19 Feb 26 Feb 4 Mar 11 Mar 18 Mar 25 Mar 1 Apr
Receipts:
Total Receipts
Operating Disbursements:
20
Payroll & Benefits (26)
Other Operating Disbursements (21)
Cash Flow from Operations
Capex
Cash Interest & Bank Fees
(27)
(1)
(0)
7 Other
Total Net Cash Flow
Beginning Cash
(22)
620
(22) Net Cash Flow
Change in O/S check float
Ending Cash
(7)
591
6 Derivative Acct. Availability
Available DIP
Available Liquidity
Liquidity Covenant
Cushion
-
597
-
591
50
13
591
13
-
604
6
(8)
(14)
28
(1)
(14)
0
275
885
575
310
31
(14)
604
(14)
-
591
6
(15)
(32)
(16)
(1)
-
3
275
872
575
297
39
(3)
591
(3)
-
588
6
(6)
(33)
(1)
(1)
(0)
(1)
275
869
575
294
41
(23)
588
(23)
-
566
6
(15)
(49)
(23)
(1)
(1)
2
275
847
575
272
37
6
566
6
-
571
6
(7)
(22)
8
(1)
-
(2)
275
852
575
277
43
(0)
571
(0)
-
571
6
(15)
(25)
3
(1)
-
(3)
275
852
575
277
44
(2)
571
(2)
-
569
6
(7)
(37)
0
(1)
(0)
(1)
275
850
575
275
50
(20)
569
(20)
-
549
6
(15)
(48)
(13)
(1)
(1)
(6)
275
830
575
255
47
16
549
16
-
565
6
(7)
(20)
20
(1)
-
(3)
275
847
575
272
57
10
565
10
-
575
6
(15)
(24)
18
(1)
-
(8)
275
856
575
281
46
8
575
8
-
583
6
(7)
(27)
12
(1)
(0)
(3)
275
864
575
289
46
(15)
(54)
(23)
(1)
(32)
(5)
275
804
575
229
(60)
583
(60)
-
523
6
Total
549
(90)
620
(90)
(7)
523
6
(156)
(406)
(12)
(9)
(49)
(19)
275
804
575
229
Source: Court filings.
6

Source: SEC filings.
SOURCES & USES
USD m, where applicable
First Lien Distribution
First Lien Debt
Distribution (%)
Total Distribution
Less: December Interest Payment
Less: Adequate Protection Payment
Remaining Distribution
Less: Take-Back Paper
Assumed Cash Distribution
Sources & Uses
Sources:
Cash Balance (11 January 2016)
DIP Drawn
Total
Uses:
December Interest Payment
Adequate Protection Payments
Bankruptcy Cash Burn (excluding Adequate Protection Payments)
Other Contingency
Cash Distribution to First Lien
Minimum Cash
DIP Paydown
Excess Cash at Emergence
Total Uses
Minimum Cash Calculation:
Working Capital Fluctuations
Business Volatility
Other Contingency
Total
Capital Structure:
Rolled DIP
Take-back Paper
Total Debt
Less: estimated cash at emergence
Total Net Debt
Memo: Total Cash at Emergence
Company Provided
9-month case
1,886
22.5%
424
(30)
(88)
306
(306)
-
654
275
929
-
88
130
50
-
375
275
11
929
50
225
100
375
-
306
306
(11)
296
386
7

USD m
Powder River Basin
Revenues:
Coal sales
Cost and Expenses:
Cost of coal sales
Depreciation, depletion & amortization
Other
Operating expenses
Other operating income:
Income (loss) from equity investments
Other revenues
Income (loss) from operations
EBITDA
Appalachia
Revenues:
Coal Sales
Cost and Expenses:
Cost of coal sales
Depreciation, depletion & amortization
Other
Operating expenses
Other operating income:
Income (loss) from equity investments
Other Revenues
Income (loss) from operations
EBITDA
Bituminous Thermal
Revenues:
Coal Sales
Cost and Expenses:
Cost of coal sales
Depreciation, depletion & amortization
Other
Operating expenses
Other operating income:
Income (loss) from equity investments
Other Revenues
Income (loss) from operations
EBITDA
Source: SEC filings.
REGIONIAL INCOME STATEMENTS
1Q16 2Q16 3Q16
183
171
27
0
198
0
1
(14)
13
313
274
43
0
317
0
(1)
(6)
37
43
39
8
0
46
0
1
(2)
5
175
166
25
0
191
0
2
(14)
11
307
268
42
0
310
0
(1)
(4)
38
52
37
9
0
46
0
1
7
16
172
161
25
0
186
0
1
(13)
12
314
274
42
0
315
0
(1)
(3)
39
54
42
8
0
50
0
1
5
13
4Q16
175
163
24
0
187
0
2
(11)
12
318
269
40
0
310
0
(0)
8
49
58
39
9
0
48
0
1
10
20
2017
739
655
92
2
749
0
4
(6)
86
1,426
1,219
166
1
1,386
0
0
39
206
230
176
37
0
213
0
3
19
57
8
2016
705
660
101
2
763
0
5
(53)
48
1,251
1,085
166
1
1,252
0
(3)
(4)
162
208
156
34
0
190
0
3
20
54

USD m
Coal Sales
Cost of Coal Sales
Gross Profit
Margin
SG&A
Other Operating (Expenses)/Income 1
EBITDA
Margin
Less: Capex (Including Investments in JVs)
Plus/Less: Change in Net Working Capital
Plus/Less: Other
Unlevered Free Cash Flow
Plus/Less: Illustrative Restructuring Initiatives
Adjusted Unlevered Free Cash Flow
PRELIMINARY BUSINESS PLAN
2015F
2,464
(2,096)
368
15%
(102)
(21)
244
10%
(132)
18
(168) 2
(38)
(20)
(58)
2016F
2,164
(1,926)
73
3%
(169)
52
237
11%
(99)
(65)
(1)
(45)
(32)
(77)
2017F
2,394
(2,076)
149
6%
(150)
28
318
13%
(101)
(68)
14
41
31
72
1) Includes liquidated damages expense of USD 56m in 2015, USD 59m in 2016 and USD 62m in 2017.
2) Primarily comprised of cash posted as collateral (USD 94m), taxes, accruals (pension, benefits, workers comp, etc.), equity investments, interest income and professional fees.
Source: SEC Filings.
9

USD m, where applicable
2017 EBITDA
Multiple
Reorganized Arch EV (2017)
New first lien debt
Equity value
1
Discounted equity value
2
REORG EQUITY VALUE
USD m, where applicable
First Lien
ESTIMATED RECOVERIES
Principal
Value of
Recovery
1,886 717
Second Lien
Unsecured Debt
350
2,875
1
9
1) We assume the company has a neglibile cash balance at 2017 year-end.
2) We discount the equity at 16%.
Sources: SEC filings, Debtwire Analytics.
149
4.5x
671
327
344
256
Estimated
Recovery
38.0%
0.3%
0.3%
10

 RSA: Does anyone fight it?
 Post-petition Financing: DIP and Securitization Program.
 Union Issues: No 1113/1114, but litigation over Patriot withdrawal liability.
 Potential reclamation obligation issues.
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