| Debt and Financing Arrangements | 11. ā ā ā ā ā ā ā ā ā September 30, December 31, ā ā 2021 ā 2020 ā (In thousands) Term loan due 2024 ($286.5 million face value) ā $ 285,943 ā $ 288,033 Tax Exempt Bonds ($98.1 million face value) ā ā 98,075 ā ā 53,090 Convertible Debt ($155.3 million face value) ā ā 119,979 ā ā 115,367 Other ā 61,995 ā 62,695 Debt issuance costs ā (10,959) ā (10,873) ā ā ā 555,033 ā ā 508,312 Less: current maturities of debt ā 138,587 ā 31,097 Long-term debt ā $ 416,446 ā $ 477,215 ā Term Loan Facility In 2017, the Company entered into a senior secured term loan credit agreement in an aggregate principal amount of $300 million (the āTerm Loan Debt Facilityā) with Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and the other financial institutions from time to time party thereto (collectively, the āLendersā). The Term Loan Debt Facility was issued at 99.50% of the face amount and will mature on March 7, 2024. The term loans provided under the Term Loan Debt Facility (the āTerm Loansā) are subject to quarterly principal amortization payments in an amount equal to $750,000 . The interest rate on the Term Loan Debt Facility is, at the option of Arch Resources, either (i) LIBOR plus an applicable margin of The Term Loan Debt Facility is guaranteed by all existing and future wholly owned domestic subsidiaries of the Company (collectively, the āSubsidiary Guarantorsā and, together with Arch Resources, the āLoan Partiesā), subject to customary exceptions, and is secured by first priority security interests on substantially all assets of the Loan Parties, including 100% of the voting equity interests of directly owned domestic subsidiaries and 65% of the voting equity interests of directly owned foreign subsidiaries, subject to customary exceptions. Accounts Receivable Securitization Facility On September 30, 2020, the Company amended and extended its existing trade accounts receivable securitization facility provided to Arch Receivable Company, LLC, a special-purpose entity that is a wholly owned subsidiary of Arch Resources (āArch Receivableā) (the āSecuritization Facilityā), which supports the issuance of letters of credit and requests for cash advances. The amendment to the Securitization Facility reduced the size of the facility from $160 million to $110 million of borrowing capacity and extended the maturity date to September 29, 2023. Under the Securitization Facility, Arch Receivable, Arch Resources and certain of Arch Resourcesās subsidiaries party to the Securitization Facility have granted to the administrator of the Securitization Facility a first priority security interest in eligible trade accounts receivable generated by such parties from the sale of coal and all proceeds thereof. As of September 30, 2021, letters of credit totaling Inventory-Based Revolving Credit Facility On September 30, 2020, Arch Resources amended the senior secured inventory-based revolving credit facility in an aggregate principal amount of $50 million (the āInventory Facilityā) with Regions Bank (āRegionsā) as administrative agent and collateral agent, as lender and swingline lender (in such capacities, the āLenderā) and as letter of credit issuer. Availability under the Inventory Facility is subject to a borrowing base consisting of (i) 85% of the net orderly liquidation value of eligible coal inventory, plus (ii) the lesser of (x) 85% of the net orderly liquidation value of eligible parts and supplies inventory and (y) 35% of the amount determined pursuant to clause (i), plus (iii) 100% of Arch Resourcesās Eligible Cash (defined in the Inventory Facility), subject to reduction for reserves imposed by Regions. The amendment of the Inventory Facility extended the maturity of the facility to September 29, 2023; eliminated the provision that accelerated maturity upon Liquidity (as defined in the Inventory Facility) falling below a specified level; and reduced the minimum Liquidity requirement from $175 million to $100 million. Additionally, the amendment included provisions that reduce the advance rates for coal inventory and parts and supplies, depending on āLiquidityā as defined as of any date of determination, the sum of, without duplication, (a) unrestricted cash or Permitted Investments as of such date of the Parent and its Subsidiaries (other than the Securitization Subsidiaries and Bonding Subsidiaries) that are not Foreign Subsidiaries, (b) withdrawable funds from brokerage accounts of Borrowers as of such date, (c) Availability as of such date, and (d) any unused commitments that are available to be drawn as of such date by the Parent pursuant to the terms of any Permitted Receivables Financing. The Inventory Facility contains certain customary affirmative and negative covenants; events of default, subject to customary thresholds and exceptions; and representations, including certain cash management and reporting requirements that are customary for asset-based credit facilities. The Inventory Facility also includes a requirement to maintain Liquidity equal to or exceeding $100 million at all times. As of September 30, 2021, letters of credit totaling $27.7 million were outstanding under the facility with $13.3 million available for borrowings. Equipment Financing On March 4, 2020, the Company entered into an equipment financing arrangement accounted for as debt. The Company received million in exchange for conveying an interest in certain equipment in operation at its Leer Mine and entered into a master lease arrangement for that equipment. The financing arrangement contains customary terms and events of default and provides for maturing on March 4, 2024. Upon maturity, all interests in the subject equipment will revert back to the Company. On July 29, 2021, the Company entered into an additional equipment financing arrangement accounted for as debt. The Company received maturing on February 1, 2025. Upon maturity, the Company will have the option to purchase the equipment. Tax Exempt Bonds On July 2, 2020, the West Virginia Economic Development Authority (the āIssuerā) issued $53.1 million aggregate principal amount of Solid Waste Disposal Facility Revenue Bonds (Arch Resources Project), Series 2020 (the āTax Exempt Bondsā) pursuant to an Indenture of Trust dated as of June 1, 2020 (the āIndenture of Trustā) between the Issuer and Citibank, N.A., as trustee (the āTrusteeā). On March 4, 2021, the Issuer issued an additional million of Series 2021 Tax Exempt Bonds. The proceeds of the Tax Exempt Bonds were loaned to the Company pursuant to a Loan Agreement dated as of June 1, as supplemented by a First Amendment to Loan Agreement dated as of March 1, 2021 (collectively, the āLoan Agreementā), each between the Issuer and the Company. The Tax Exempt Bonds are payable solely from payments to be made by the Company under the Loan Agreement as evidenced by a Note from the Company to the Trustee. The proceeds of the Tax Exempt Bonds are being used to finance certain costs of the acquisition, construction, reconstruction, and equipping of solid waste disposal facilities at the Companyās Leer South development, and for capitalized interest and certain costs related to issuance of the Tax Exempt Bonds. The Tax Exempt Bonds will bear interest payable each January 1 and July 1, commencing January 1, 2021 for the Series 2020 and July 1, 2021 for the Series 2021, and have a final maturity of July 1, 2045; however, the Tax Exempt Bonds are subject to mandatory tender on July 1, 2025 at a purchase price equal to 100% of the principal amount of the Tax Exempt Bonds, plus accrued interest to July 1, 2025. The Series 2020 and Series 2021 Tax Exempt Bonds bear interest of The Tax Exempt Bonds are subject to redemption (i) in whole or in part at any time on or after January 1, 2025 at the option of the Issuer, upon the Companyās direction at a redemption price of par, plus interest accrued to the redemption date; and (ii) at par plus interest accrued to the redemption date from certain excess Tax Exempt Bonds proceeds as further described in the Indenture of Trust. The Companyās obligations under the Loan Agreement are (i) except as otherwise described below, secured by first priority liens on and security interests in substantially all of the Companyās and Subsidiary Guarantorsā real property and other assets, subject to certain customary exceptions and permitted liens, and in any event excluding our accounts receivable and inventory; and (ii) jointly and severally guaranteed by the Subsidiary Guarantors, subject to customary exceptions. The collateral securing the Companyās obligations under the Loan Agreement is substantially the same as the collateral securing the obligations under the Term Loan Debt Facility other than with respect to variances in certain real property collateral. The real property securing the Companyās obligations under the Loan Agreement includes a subset of the real property collateral securing the obligations under the Term Loan Debt Facility and includes only mortgages on substantially all of the Companyās revenue generating real property and assets. The Loan Agreement contains certain affirmative covenants and representations, including but not limited to: (i) maintenance of a rating on the Tax Exempt Bonds; (ii) maintenance of proper books of records and accounts; (iii) agreement to add additional guarantors to guarantee the obligations under the Loan Agreement in certain circumstances; (iv) procurement of customary insurance; and (v) preservation of legal existence and certain rights, franchises, licenses and permits. The Loan Agreement also contains certain customary negative covenants, which, among other things, and subject to certain exceptions, include restrictions on (i) release of collateral securing the Companyās obligations under the Loan Agreement; (ii) mergers and consolidations and disposition of assets, and (iii) restrictions on actions that may jeopardize the tax-exempt status of the Tax Exempt Bonds. The Loan Agreement contains customary events of default, subject to customary thresholds and exceptions, including, among other things: (i) nonpayment of principal, purchase price, interest and other fees (subject to certain cure periods); (ii) bankruptcy or insolvency proceedings relating to us; (iii) material inaccuracy of a representation or warranty at the time made; (iv) cross-events of default to indebtedness of at least $50 million; and (v) cross defaults to the Indenture of Trust, the guaranty related to the Tax Exempt Bonds or any related security documents. As of September 30, 2021, the Company has utilized the total Tax Exempt Bond proceeds. Convertible Debt On November 3, 2020, the Company issued $155.3 million in aggregate principal amount of 5.25% convertible senior notes due 2025 (āConvertible Notes ā or āConvertible Debtā). The net proceeds from the issuance of the Convertible Notes, after deducting offering related costs of $5.1 million and cost of a āCapped Call Transactionā as defined below of $17.5 million, were approximately $132.7 million. The Convertible Notes bear interest at the annual rate of 5.25%, payable semiannually in arrears on May 15 and November 15 of each year, beginning on May 15, 2021, and will mature on November 15, 2025, unless earlier converted, redeemed or repurchased by the Company. ā The Convertible Notes are convertible into cash, shares of the Companyās common stock or a combination thereof, at the Companyās election, at an initial conversion rate of 26.7917 shares of common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $37.325 per share, subject to adjustment pursuant to the terms of the indenture governing the Convertible Notes (the "Indenture"). Before July 15, 2025, noteholders will have the right to convert their Convertible Notes only upon the occurrence of certain events. From and after July 15, 2025, noteholders may convert their Convertible Notes at any time until the close of business on the second scheduled trading day immediately before the maturity date. ā The conversion rate of the Convertible Notes may be adjusted in certain circumstances, including in connection with a conversion of the Convertible Notes made following certain fundamental changes and under other circumstances set forth in the Indenture. It is the Companyās current intent and policy to settle any conversions of notes through a combination of cash and shares. ā The Convertible Notes will be redeemable, in whole and not part, at the Companyās option at any time on or after November 20, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Companyās common stock exceeds 130% of the conversion price on: (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption noticeĶ¾ and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling the Convertible Notes for redemption will constitute a Make-Whole Fundamental Change, which will result in an increase to the conversion rate in certain circumstances for a specified period of time. No sinking fund is provided for the Convertible Notes. ā During the third quarter of 2021, the common stock sale condition of the Convertible Notes was satisfied. As described in the Indenture, this condition is satisfied when the closing stock price exceeds trading days prior to quarter end. As a result, the Convertible Notes are currently convertible at the election of noteholders during the fourth quarter. Due to the Companyās stated intent to settle the principal value in cash, the liability portion of ā As of September 30, 2021, all of the Convertible Notes remained outstanding. In addition, from October 1, 2021 to the date of this filing, the Company has not received any conversion requests for Convertible Notes and does not anticipate receiving any conversion requests in the near term as the market value of the Convertible Notes exceeds the conversion value of the Convertible Notes. As of September 30, 2021, the if-converted value of the Convertible Notes exceeded the principal amount by $230.5 million. ā Total interest expense related to the Convertible Debt for the three months ended September 30, 2021 was $3.8 million and was comprised of $2.0 million related to the contractual interest coupon and $1.8 million related to the amortization of the discount on the liability component. Total interest expense related to the Convertible Debt for the nine months ended September 30, 2021 was million related to the amortization of the discount on the liability component. ā Capped Call Transactions ā In connection with the offering of the Convertible Notes, the Company entered into privately negotiated convertible note hedge transactions (collectively, the āCapped Call Transactionsā). The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the number of shares of the Companyās common stock that initially underlie the Convertible Notes. ā The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset any cash payments the Company is required to make in excess of the principal amount due upon conversion of the Convertible Notes in the event that the market price of the Companyās common stock is greater than the strike price of the Capped Call Transactions, which was initially $37.325 per share (subject to adjustment under the terms of the Capped Call Transactions). The strike price of $37.325 corresponds to the initial conversion price of the Convertible Notes. The number of shares underlying the Capped Call Transactions is 4.2 million. ā The cap price of the Capped Call Transactions is $52.2550 per share, which represents a premium of 75% over the last reported sale price of the Companyās common stock on October 29, 2020. The cost of the Capped Call Transactions was approximately ā The Capped Call Transactions are separate transactions, in each case entered into between the Company and the respective Option Counterparty, and are not part of the terms of the Convertible Notes and will not affect any holderās rights under the Convertible Notes. Holders of the Convertible Notes will not have any rights with respect to the Capped Call Transactions. Additionally, the cost of the Capped Call Transactions is not expected to be tax deductible as the Company did not elect to integrate the Capped Call Transactions into the notes for tax purposes. ā Accounting Treatment of the Convertible Notes and Related Hedge Transactions As the Capped Call Transactions meet certain accounting criteria, the Capped Call Transactions were classified as equity and are not accounted for as derivatives. The proceeds from the offering of the Convertible Notes were separated into liability and equity components. On the date of issuance, the liability and equity components of the Convertible Notes were calculated to be approximately $114.5 million and $40.8 million, respectively. The initial $114.5 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature assuming a hypothetical interest rate of 12.43%. The inputs and assumptions used in the calculated fair value of the liability component of the convertible debt fall within Level 2 of the fair value hierarchy. million is being amortized over the life of the Convertible Notes as non-cash interest expense using the effective interest method. ā In connection with the above-noted transactions, the Company incurred approximately $5.9 million of debt issuance costs. These offering expenses were allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt and equity issuance costs, respectively. The Company allocated ā Interest Rate Swaps ā The Company has entered into a series of interest rate swaps to fix a portion of the LIBOR interest payments due under the Term Loan Debt Facility. The interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair value of the interest rate swaps is recorded on the Companyās Condensed Consolidated Balance Sheet as an asset or liability with the effective portion of the gains or losses reported as a component of accumulated other comprehensive income and the ineffective portion reported in earnings. As interest payments are made on the Term Loan, amounts in accumulated other comprehensive income will be reclassified into earnings through interest expense to reflect a net interest on the Term Loan equal to the effective yield of the fixed rate of the swap plus 2.75% which is the spread on the revised Term Loan. In the event that an interest rate swap is terminated prior to maturity, gains or losses in accumulated other comprehensive income will remain deferred and be reclassified into earnings in the periods which the hedged forecasted transaction affects earnings. ā ā Below is a summary of the Companyās outstanding interest rate swap agreements designated as hedges as of September 30, 2021: ā ā ā ā ā ā ā ā ā ā Notional Amount ā ā ā ā ā ā ā ā (in millions) Effective Date Fixed Rate Receive Rate Expiration Date ā ā ā ā ā ā ā ā ā ā $ 100.0 ā June 30, 2021 2.315 % 1-month LIBOR ā June 30, 2023 ā The fair value of the interest rate swaps at September 30, 2021 is a liability of $2.3 million, which is recorded within Other noncurrent liabilities, with the offset to accumulated other comprehensive income on the Companyās Condensed Consolidated Balance Sheet. The Company realized $0.3 million and $1.6 million of losses during the three and nine months ended September 30, 2021, respectively, related to settlements of the interest rate swaps, which were recorded to interest expense on the Companyās Condensed Consolidated Statement of Operations. The interest rate swaps are classified as Level 2 within the fair value hierarchy. |
