NEW YORK (TheStreet) -- Arch Coal (ACI) stock is retreating by 24.41% to $2.88 on heavy trading volume on Friday afternoon, after a judge in New York refused to give a ruling after a creditor sued a group of lenders to block a debt exchange, Bloomberg reports.
New York State Supreme Court Justice Saliann Scarpulla urged the parties to negotiate or seek a mediator.
GSO Special Situation Master Fund (BX - Get Report) , which is a junior creditor of Arch Coal, sued a group of lenders to stop them from exchanging debt for securities with a higher rank and a longer maturity, Bloomberg noted.
GSO alleges the senior lenders were either seeking to "extract a favorable ransom" from the company and its creditors or force Arch Coal into bankruptcy to protect their assets.
Scarpulla said she needs to listen to more arguments or deny the request, Bloomberg added.
Arch Coal extended its deadline for the exchange to October 26 from September 23.
Separately, TheStreet Ratings team rates ARCH COAL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate ARCH COAL INC (ACI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, poor profit margins, weak operating cash flow and generally high debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 73.5% when compared to the same quarter one year ago, falling from -$96.86 million to -$168.10 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ARCH COAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The gross profit margin for ARCH COAL INC is currently extremely low, coming in at 9.16%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -26.08% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$121.30 million or 218.62% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 3.69 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ACI has managed to keep a strong quick ratio of 2.11, which demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ACI