From an article titled ‘Fitch: Higher default rates expected for US coal sector”:
Should Arch Coal, Inc. and Peabody Energy Corp. file for bankruptcy, the industry bond default rate would surpass 50%, according to Fitch Ratings. The wave of bankruptcies in the U.S. coal space has caused the broader metals/mining sector default rate to rise to double digits for high yield bond and leveraged loan indices.
A spate of coal defaults has resulted from unsustainably high debt leverage from past acquisitions amid an environment of weak coal pricing. The low pricing and defaults were driven by over-supply of steam coal and metallurgical coal, burdensome regulations, and competition from low priced natural gas for electric generation business. Three major producers, Patriot Coal Corp., Alpha Natural Resources Inc., and Walter Energy Inc. as well as some smaller mining bond issuers including: Xinergy Corp. and Winsway Enterprises Holdings Ltd. defaulted earlier this year.