Arch Coal Inc’s (OTCMKTS: ACIIQ) Chapter 11 bankruptcy filing yesterday has heightened fears over the future of coal companies. Many coal stocks have yet to recover from a steep downhill slide following Arch Coal’s announcement, exacerbated by a broad market collapse today.

Trading on Arch Coal’s stock was suspended on the New York Stock Exchange and transactions on the stock have shifted to the over-the-counter platform. The shift has done little to keep the stock steady.

Arch Coal is pulling a number of coal stocks down with it. Peabody Energy Corporation (NYSE: BTU) fell 11.5% in the last session and Cloud Peak Energy Inc. (NYSE: CLD) trimmed 13.4% of its market cap in the same session. Alpha Natural Resources, Inc. (OTCMKTS:ANRZQ) also dipped more than 20%.

When coal prices were higher, Arch Coal and many other coal producers spared no effort to acquire what they considered strategic assets. Arch Coal borrowed heavily to fund its acquisitions, leaving it with a highly-leveraged balance sheet. Unfortunately, the celebration over high coal prices didn’t last long, leaving Arch Coal high and dry.

The situation was made worse by shrinking demand for coal, especially in the face of climate change threats that have turned many energy producers towards cleaner sources of energy. The slide in oil and gas prices added salt to Arch’s wounds.

$700 million hole

Arch Coal’s balance sheet shows $6.5 billion debt against $5.8 billion in assets, which means that the company has a $700 million hole in its financial books. The company’s bankruptcy filing is not unexpected as many coal companies are struggling and some will likely be forced to follow down Arch Coal’s path sooner or later.