CORRECTED-UPDATE 3-Arch Coal to delay bond interest payment as bankruptcy looms (Dec. 15)

(In Dec. 15 story, corrects analyst's name in paragraph 13 to
Zachary Bader from Zach Bader)
* Co says has 30 days to continue talks with creditors
* Co may file for bankruptcy this year-BB&T Capital Markets
* Shares rise as much as 35 pct

By Amrutha Gayathri
Dec 15 (Reuters) - Arch Coal Inc ACI.N , the second-largest
coal miner in the United States, delayed a $90 million interest
payment that was due Tuesday, pushing back a widely expected
bankruptcy filing.
The company's shares shot up nearly 35 percent to $1.20.
"It tells you how bad things have become when hanging on
becomes a victory," analysts at BB&T (N:BBT) Capital Markets wrote in a
note. "This year, an ACI filing looks like a near certainty."
The company was widely expected to file for bankruptcy by
Tuesday.
If Arch Coal files a Chapter 11 petition, it will become the
fourth coal miner to declare bankruptcy this year, joining
Walter Energy Inc WLTGQ.PK , Alpha Natural Resources Inc
ANRZQ.PK and Patriot Coal.
"Shareholders in this troubled sector are likely relieved
that (Arch Coal's) management is exploring options to maximize
value to the benefit of all stakeholders," said David Johnson, a
founding partner at restructuring firm ACM Partners.
Short covering also contributed to the spike in Arch Coal's
shares, analysts said. Nearly 48 percent of the company's
outstanding shares are shorted, according to Thomson Reuters
data.
Arch Coal, which ended a proposed debt swap in October, said
it had 30 days to continue talks with creditors to restructure
its balance sheet.
Companies typically undertake debt exchanges to cut interest
expenses, said Odeon Capital Group analyst Anup Goswami.
However, Arch Coal ended its debt exchange in October after
failing to strike a deal with creditors.
Debt swaps have become common in the wider energy industry,
with companies such as Chesapeake Energy Corp (N:CHK) CHK.N exchanging
unsecured debt for secured debt.
Arch Coal, burdened by strict regulations and plummeting
coal prices, said last month it could file for bankruptcy, even
if it struck a restructuring agreement.
The company had about $694.5 million of liquidity as of
September-end and about $5 billion in long-term debt, stemming
mainly from its purchase of International Coal Group in 2011.
"You are seeing coal companies that are filing (for
bankruptcy) with a lot of cash on the balance sheet," said Reorg
Research analyst Zachary Bader. "One reason is that they have
over-leveraged capital structures ... it doesn't make economic
sense to pay interest to debt holders that have claims that are
essentially worthless."
Arch Coal's market value has been nearly wiped out this
year. The company, whose market capitalization was $3.78 billion
at the end of last year, was valued at about $19 million as of
Monday's close.