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

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AGENDA

1. Opening Remarks: Kate Marino, Deputy EditorKate.Marino@Debtwire.com

2. The Descent: Madalina Iacob, Associate Editor & Energy ReporterMadalina.Iacob@Debtwire.com

3. First Day Hearing: Maria Chutchian, Court ReporterMaria.Chutchian@Debtwire.com

4. Financial Analysis: Thomas Rorick, Distressed AnalystThomas.Rorick@Debtwire.com

5. Court Case: Joshua Friedman, Legal AnalystJoshua.Friedman@Debtwire.com

6. Q & A

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THE DESCENT

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.

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FIRST DAY HEARING

Unsecured and second lien holders unsatisfied with RSA

DIP issues

Judge Rendlen oversees his largest Chapter 11 case

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FINANCIAL ANALYSIS: ADJUSTED CAPITAL STRUCTURE

PRO FORMA ADJUSTED CAPITAL STRUCTURE

USD m, where applicable Coupon Face Amount Market Amount Adj. Pro Forma Face Amount Price Maturity 2016PF

Face LeverageDIP Term Loan 1 L+ 9.00% 275 275 (275) 0 - 22 Sep 2016 -New First Lien Debt 2 L+ 9.00% - - 327 327 - Five Years 4.5xFirst lien term loan 3 L+ 5.00% 1,886 704 (1,886) 0 37 16 May 2018 -A/R securitization facility 4 - 178 178 - 178 - 8 Dec 2017 6.9xSecond lien notes 8.00% 350 7 (350) 0 2 15 Jan 2019 -Total secured debt 2,414 889 (1,910) 505 - Senior unsecured notes 7.00% 1,000 8 (1,000) 0 1 15 Jun 2019 -Senior unsecured notes 9.875% 375 4 (375) 0 1 15 Jun 2019 -Senior unsecured notes 7.25% 500 3 (500) 0 1 1 Oct 2020 -Senior unsecured notes 7.25% 1,000 8 (1,000) 0 1 15 Jun 2021 -Total debt 5,289 911 (4,785) 505 6.9xLess: cash and cash equivalents 5 591 591 (205) 386 Net debt 4,698 320 119 1.6xEquity market capitalization 6 9 9 247 256 Enterprise value 4,707 328 374 5.1x2016P EBITDA 73

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.

OBLIGATIONS (USD m)Obligations: Surety Bonds L/Cs CashAsset Retirement Obligations 681 41 8 Worker's Comp 20 112 11 Other 58 7 -Total 758 160 19

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FINANCIAL ANALYSIS: INTERIM CASH BUDGET

Source: Court filings.

CASH BUDGET (USDm)

USD mPre-

Petition Post-PetitionTotal

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 20 50 31 39 41 37 43 44 50 47 57 46 46 549

Operating Disbursements:

Payroll & Benefits (26) (8) (15) (6) (15) (7) (15) (7) (15) (7) (15) (7) (15) (156)

Other Operating Disbursements (21) (14) (32) (33) (49) (22) (25) (37) (48) (20) (24) (27) (54) (406)

Cash Flow from Operations (27) 28 (16) (1) (23) 8 3 0 (13) 20 18 12 (23) (12)

Capex (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (9)

Cash Interest & Bank Fees (0) (14) - (0) (1) - - (0) (1) - - (0) (32) (49)

Other 7 0 3 (1) 2 (2) (3) (1) (6) (3) (8) (3) (5) (19)

Total Net Cash Flow (22) 13 (14) (3) (23) 6 (0) (2) (20) 16 10 8 (60) (90)

Beginning Cash 620 591 604 591 588 566 571 571 569 549 565 575 583 620

Net Cash Flow (22) 13 (14) (3) (23) 6 (0) (2) (20) 16 10 8 (60) (90)

Change in O/S check float (7) - - - - - - - - - - - - (7)

Ending Cash 591 604 591 588 566 571 571 569 549 565 575 583 523 523

Derivative Acct. Availability 6 6 6 6 6 6 6 6 6 6 6 6 6 6

Available DIP - 275 275 275 275 275 275 275 275 275 275 275 275 275

Available Liquidity 597 885 872 869 847 852 852 850 830 847 856 864 804 804

Liquidity Covenant - 575 575 575 575 575 575 575 575 575 575 575 575 575

Cushion 591 310 297 294 272 277 277 275 255 272 281 289 229 229

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FINANCIAL ANALYSIS: SOURCES & USES

Source: SEC filings.

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

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FINANCIAL ANALYSIS: REGIONAL IS

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

Source: SEC filings.

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FINANCIAL ANALYSIS: MGT. PROJECTIONS

PRELIMINARY BUSINESS PLANUSD m 2015F 2016F 2017F

Coal Sales 2,464 2,164 2,394

Cost of Coal Sales (2,096) (1,926) (2,076)

Gross Profit 368 237 318

Margin 15% 11% 13%

SG&A (102) (99) (101)

Other Operating (Expenses)/Income 1 (21) (65) (68)

EBITDA 244 73 149

Margin 10% 3% 6%

Less: Capex (Including Investments in JVs) (132) (169) (150)

Plus/Less: Change in Net Working Capital 18 52 28

Plus/Less: Other (168) 2 (1) 14

Unlevered Free Cash Flow (38) (45) 41

Plus/Less: Illustrative Restructuring Initiatives (20) (32) 31

Adjusted Unlevered Free Cash Flow (58) (77) 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.

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VALUATION INSIGHTS: ESTIMATED RECOVERIES

ESTIMATED RECOVERIESUSD m, where applicable Principal Value of

RecoveryEstimated Recovery

First Lien 1,886 717 38.0%

Second Lien 350 1 0.3%

Unsecured Debt 2,875 9 0.3%

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.

REORG EQUITY VALUEUSD m, where applicable 2017 EBITDA 149 Multiple 4.5xReorganized Arch EV (2017) 671 New first lien debt 327 Equity value 1 344 Discounted equity value 2 256

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COURT CASE

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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Q&A

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