Arch Coal, the second-largest U.S. coal miner and a key supplier to Minnesota utilities, filed for Chapter 11 bankruptcy protection on Monday with a plan to cut $4.5 billion in debt from its balance sheet in the midst of a prolonged downturn in the coal industry.

Missouri-based Arch Coal has been saddled with debt since its $3.4 billion acquisition of International Coal Group in 2011, which came at the peak of coal prices.

A subsequent sharp drop in prices, stricter pollution controls and increasing competition from natural gas has made it difficult for heavily indebted producers like Arch Coal to overhaul their balance sheets.

Arch said on Monday it has an agreement with more than 50 percent of its first-lien lenders for its debt-cutting plan and enough capital to run its operations smoothly throughout the restructuring process.

"After carefully evaluating our options, we determined that implementing these agreements through a court-supervised process represents the best way to solidify our financial position and strengthen our balance sheet," Chairman and Chief Executive John Eaves said in a statement.

The company expects mining operations and customer shipments to continue uninterrupted.

Shares in leading U.S. coal producer Peabody were down 16.3 percent at $5.58, reaching a record low.

Producers accounting for more than 25 percent of U.S. coal are currently in bankruptcy, based on 2013 government figures of major U.S. coal companies' production.

Arch Coal's move follows Chapter 11 filings by coal rivals Walter Energy Inc., Alpha Natural Resources Inc. and Patriot Coal last year.

Arch Coal was widely expected to go bankrupt after delaying a $90 million interest payment due in December.

In November, it reported a $2 billion third-quarter net loss and said it could have trouble servicing its debt.

The company had ended a proposed debt swap previously, seen as key to delaying the prospects of bankruptcy, after opposition from a group of senior lenders who said that the terms of the deal jeopardized their return.