Lenders to Arch Coal Inc. are close to picking a replacement for Bank of America Corp., which resigned last month as their agent bank amid an escalating creditor feud, according to three people with knowledge of the matter.
Wilmington Trust NA is the top choice to fill the role as an advocate for holders of a $1.9 billion term loan after Bank of America quit when a group of lenders asked it not to sign off on a debt swap, said the people, who asked not to be identified because the information isn’t public. The firm hasn’t been hired yet, they said.
If Wilmington Trust gets the loan-agent job, it will walk into a squabble that’s pitting senior lenders against Arch Coal and junior bondholders who would benefit from the debt exchange announced six weeks ago. Arch Coal is attempting to cut debt costs in a bid to weather a commodities slump that’s already pulled three other large U.S. coal miners into bankruptcy this year.
Kent Wissinger, a spokesman for Wilmington Trust, and Logan Bonacorsi, a spokeswoman for St. Louis-based Arch Coal, didn’t respond to telephone and e-mail messages seeking comment. Debtwire earlier reported that Wilmington Trust has been hired.
The company, which last posted net income in 2011, is seeking through the swap to replace its credit line with one that has less restrictive terms. A third extension of the exchange offer expires Friday at midnight in New York.
The senior-lender group, which claims to represent a majority of the holders of the loan, wants to thwart the exchange because it would allow junior creditors to move up in seniority and dilute the senior investors’ claim on assets. The lenders on July 28 directed Bank of America, the agent for the debt at the time, not to grant approval for the proposed swap, Arch coal said in a statement.
Bank of America resigned as agent at the end of July, two other people with knowledge of the matter said.
Without a loan agent, Arch Coal’s swap has been in limbo. It has had to twice extend the swap offer’s end date since the lenders sent the direction letter to Bank of America.
Term-loan holders “have the right, in consultation with” Arch Coal, to select a new term-loan agent, according to the company’s credit agreement. The outgoing agent can choose a new agent if the lenders don’t appoint their own replacement within 30 days after the agent gives notice of its resignation, according to the document.
The loan fell less than 0.1 cent to 57.1 cents on the dollar Friday, according to price quotes compiled by Bloomberg.
Arch Coal is among a slew of U.S. miners that are struggling amid a plunge in coal prices. Alpha Natural Resources Inc., Walter Energy Inc., Patriot Coal Corp. and James River Coal Co. have filed for bankruptcy during the past 16 months as the price of coal used in steelmaking dropped 67 percent since