Financial Instruments and Other Guarantees

In the normal course of business, the Company is a party to guarantees and financial instruments with off-balance-sheet risk, most of which are not reflected in the accompanying condensed consolidated balance sheets. Such financial instruments are valued based on the amount of exposure under the instrument and the likelihood of required performance.

As of March 31, 2017, the Company had the following financial instruments and other guarantees:



	Reclamation Bonding Requirements		Coal Lease Obligations		Workers’ Compensation Obligations		Other ⁽¹⁾		Total		Cash Collateral in Support of Financial Instruments ⁽²⁾
	(Dollars in millions)
Self-bonding	$	894.7	$	—	$	—	$	—	$	894.7	$	—
Surety bonds ⁽³⁾	348.4		93.8		19.1		14.0		475.3		73.4
Bank guarantees	57.8		—		—		25.4		83.2		83.5
Other ⁽⁴⁾	207.7		—		40.7		63.3		311.7		207.7
Total	$	1,508.6	$	93.8	$	59.8	$	102.7	$	1,764.9	$	364.6


⁽¹⁾	Other includes the $37.0 million in letters of credit related to TXU Europe Limited described below and an additional $65.7 million in bank guarantees, letters of credit and surety bonds related to collateral for road maintenance, performance guarantees and other operations.


⁽²⁾	Cash collateral in support of financial instruments is included in the condensed consolidated balance sheets within "Restricted cash" or "Investments and other assets" depending upon the nature of the underlying obligation.


⁽³⁾	A total of $72.6 million of letters of credit issued as collateral to support surety bonds related to Patriot have been excluded from above as they no longer represent off-balance sheet obligations as discussed in Note 20. "Matters Related to the Bankruptcy of Patriot Coal Corporation".


⁽⁴⁾	Other under the "Reclamation Bonding Requirements" heading represents the amount of reclamation bonding requirements for our Australian Mining operations that were not otherwise supported by bank guarantees. Such amounts were supported by cash collateral held by the applicable state agency.

The Company is party to an agreement with the PBGC and TXU Europe Limited, an affiliate of the Company’s former parent corporation, under which the Company is required to make contributions to two of the Company’s qualified defined benefit pension plans and to maintain a $37.0 million letter of credit in favor of the PBGC. If the Company or the PBGC gives notice of an intent to terminate one or more of the covered pension plans in which liabilities are not fully funded, or if the Company fails to maintain the letter of credit, the PBGC may draw down on the letter of credit and use the proceeds to satisfy liabilities under the Employee Retirement Income Security Act of 1974, as amended. The PBGC, however, is required to first apply amounts received from a $110.0 million guarantee in place from TXU Europe Limited in favor of the PBGC before it draws on the Company’s letter of credit. On November 19, 2002, TXU Europe Limited was placed under the administration process in the U.K. (similar to a U.S. bankruptcy process) and continues under this process as of March 31, 2017. As a result of these proceedings, TXU Europe Limited may be liquidated or otherwise reorganized in such a way as to relieve it of its obligations under its guarantee.

Reclamation Bonding

The Company can bond its U.S. reclamation requirements under the Surface Mining Control and Reclamation Act of 1977 (SMCRA) using three categories of bonds: surety bonds, collateral bonds or self-bonds. A surety bond is an indemnity agreement in a sum certain payable to the regulatory authority, executed by the permittee as principal and which is supported by the performance guarantee of a surety corporation. A collateral bond can take several forms, including cash, letters of credit, first lien security interest in property or other qualifying investment securities. A self-bond is an indemnity agreement in a sum certain executed by the permittee or by the permittee and any corporate guarantor made payable to the regulatory authority.

Our asset retirement obligations calculated in accordance with GAAP for our U.S. operations were $476.7 million as of March 31, 2017. Our total reclamation bonding requirements in the U.S. were $1,243.1 million as of March 31, 2017. The bond requirements represent the calculated cost to reclaim the current operations of a mine if it ceased to operate in the current period. The cost calculation for each bond must be completed according to the regulatory authority of each state. The bond requirement amount under SMCRA for our U.S. operations significantly exceeds the financial liability for final mine reclamation because the financial liability is discounted from the end of the mine’s economic life to the balance sheet date in recognition of the economic reality that the final reclamation obligation is a number of years (and in some cases decades) away. The bond amount, in contrast with the asset retirement obligation, presumes reclamation begins immediately.

During August and September 2016, the Bankruptcy Court approved four motions for Stipulations and Orders (collectively, the Stipulations) regarding settlement agreements with the states of Wyoming, New Mexico, Indiana, and Illinois. The Stipulations provide the relevant state authorities with additional financial assurance for the Company’s performance of its reclamation obligations by entitling them to (i) claims in the Chapter 11 Cases that have priority over all administrative expenses of the kind specified in section 503(b) of the Bankruptcy Code for the specified values set forth in the Stipulations and (ii) in the cases of Wyoming, Indiana and Illinois, $0.8 million, $7.5 million and $3.2 million, respectively, in letters of credit or surety bonds related to closed mining operations, together not to exceed the full amount of the $200 million bonding accommodation facility provided for in the Company's prior Superpriority Secured Debtor-In-Possession Credit Agreement. Each state received financial assurances equal to approximately 17.5% of the Company's prepetition reclamation bond amount with the relevant state. In addition to providing supplemental financial assurances to these states, the Company agreed to, among other things, quarterly reclamation activity status meetings as well as targeting reductions in the amount of bonds outstanding with these states. Pursuant to the Stipulations, the states effectively deemed the Company’s bonding requirements satisfied for the pendency of the Chapter 11 Cases.

As previously disclosed, the Company's ability to self-bond reduces the Company's costs of securing reclamation obligations and enhances liquidity to the extent alternate forms of bonding would require the Company to post collateral. As of March 31, 2017, the Company was self-bonded in Illinois, Indiana, New Mexico and Wyoming. The Company shifted its self-bond amounts to a third-party surety bond program on the Effective Date. In advance of entering into the program in early April 2017, the Company deposited $89.2 million of cash collateral related to surety bonds entered into on the Effective Date.

In Australia, we generally used bank guarantees to satisfy our financial assurance requirements related to reclamation. Those bank guarantees were backed by collateral, which was provided in the form of letters of credit. Subsequent to the Petition Date, some of the bank guarantee issuers drew on a portion of those letters of credit and subsequently canceled the bank guarantees, which resulted in the cash collateral being transferred to the applicable state agency. The total cash collateral held in relation to the Company's Australian reclamation obligations was $207.7 million at March 31, 2017 and was included in "Investments and other assets" due to the long-term nature of the underlying obligations. The Company's asset retirement obligations calculated in accordance with GAAP for its Australian operations were $271.3 million as of March 31, 2017.

Accounts Receivable Securitization

On March 25, 2016, the Company amended and restated its accounts receivable securitization program (Securitization Program) to, among other things, extend the term of the program by two years to March 23, 2018 and reduce the maximum availability under the facility from $275.0 million to $180.0 million. The accessible capacity of the program varies daily, dependent upon the actual amount of receivables available for contribution and various reserves and limits. As of March 31, 2017, $66.9 million was deposited in a collateral account to secure obligations under the facility.

Under the Securitization Program, the Company contributes the trade receivables of most of its U.S. subsidiaries on a revolving basis to its wholly-owned, bankruptcy-remote subsidiary (Seller), which then sells the receivables in their entirety to unaffiliated asset-backed commercial paper conduits and banks (the Conduits). After the sale, the Company, as servicer of the assets, collects the receivables on behalf of the Conduits for a nominal servicing fee.

The Seller is a separate legal entity whose assets are available first and foremost to satisfy the claims of its creditors. Of the receivables sold to the Conduits, a portion of the amount due to the Seller is deferred until the ultimate collection of the underlying receivables. During the three months ended March 31, 2017, the Company received total consideration of $724.7 million related to accounts receivable sold under the Securitization Program, including $403.6 million of cash up front from the sale of the receivables, an additional $55.7 million of cash upon the collection of the underlying receivables and $265.4 million that had not been collected at March 31, 2017 and was recorded at carrying value, which approximates fair value. There was no reduction in accounts receivable as a result of securitization activity with the Conduits at March 31, 2017 and December 31, 2016. As of March 31, 2017, $167.2 million in letters of credit remained outstanding under the Securitization Program.

The securitization activity has been reflected in the unaudited condensed consolidated statements of cash flows as an operating activity because both the cash received from the Conduits upon sale of the receivables as well as the cash received from the Conduits upon the ultimate collection of the receivables are not subject to significantly different risks given the short-term nature of the Company’s trade receivables. The Company recorded expense associated with securitization transactions of $2.5 million and $0.8 million for the three months ended March 31, 2017 and 2016, respectively.

With the approval of the Bankruptcy Court, the Company executed two additional amendments to the March 25, 2016 agreement during the second quarter of 2016. These amendments permitted the continuation of the Securitization Program through the Company’s Chapter 11 Cases.

Upon the Effective Date, the Company entered into the Sixth Amended and Restated Receivables Purchase Agreement, dated as of April 3, 2017, for the purpose of extending the Securitization Program upon emergence from the Chapter 11 Cases, increasing the purchase limit to an amount not to exceed $250 million, and including certain receivables from the Company's Australian operations.

Restricted Cash

The Company had balance sheet-reflected restricted cash of $80.7 million and $54.3 million as of March 31, 2017 and December 31, 2016, respectively, primarily related to the collateral under the Securitization Program and various other obligations. The Company also had restricted cash held as collateral for financial assurances associated with reclamation and other obligations of $88.0 million and $71.4 million as of March 31, 2017 and December 31, 2016, respectively, included in "Investments and other assets" due to the long-term nature of the underlying obligations. The Company also had $1,000.0 million of restricted cash at March 31, 2017, as discussed in Note 1. "Basis of Presentation."

The Company has also posted separate collateral of $506.0 million and $457.9 million as of March 31, 2017 and December 31, 2016, respectively, included in "Investments and other assets." This collateral supports a variety of obligations and commitments surrounding the mining, reclamation and shipping of our production.

Other

The Company is the lessee under numerous equipment and property leases. It is common in such commercial lease transactions for the Company, as the lessee, to agree to indemnify the lessor for the value of the property or equipment leased, should the property be damaged or lost during the course of the Company’s operations. The Company expects that losses with respect to leased property, if any, would be covered by insurance (subject to deductibles). The Company and certain of its subsidiaries have guaranteed other subsidiaries’ performance under various lease obligations. Aside from indemnification of the lessor for the value of the property leased, the Company’s maximum potential obligations under its leases are equal to the respective future minimum lease payments, and the Company assumes that no amounts could be recovered from third parties.

The Company has provided financial guarantees under certain long-term debt agreements entered into by its subsidiaries and substantially all of the Company’s U.S. subsidiaries provide financial guarantees under long-term debt agreements entered into by the Company. The maximum amounts payable under the Company’s debt agreements are equal to the respective principal and interest payments