- Holders of $1.9 billion loan may be offered higher yield
- Opposing lenders claim debt swap will weaken their position
Arch Coal Inc. is seeking a compromise with lenders opposing a debt-swap deal that would help the struggling coal miner avoid a bankruptcy filing, according to four people with knowledge of the matter.
Holders of the coal miner’s $1.9 billion loan may be offered better terms as an incentive to drop their opposition to a proposal to swap as much as $2.38 billion of junior-ranking borrowings for new senior obligations, said the people, who asked not to be named because the discussions are private.
The opposing group, claiming to represent the majority of senior creditors, is demanding to be paid a comparable yield on a new loan the company is seeking as part of the exchange, Arch Coal said in a July 29 statement. The lenders say that new creditors would receive preferential treatment over existing investors, which would violate provisions of the loan pact.
Arch Coal, which announced the offer on July 2, has extended the deadline again to Aug. 28. The company and junior creditors are discussing their options if the swap deal fails, including whether to sue senior lenders for worsening Arch Coal’s financial woes, said three of the people.
Logan Bonacorsi, a spokeswoman for St. Louis-based Arch Coal, didn’t respond to telephone and e-mail messages seeking comment.
Arch Coal shares jumped 51 percent to trade at $2.21 at 12:56 p.m. in New York from Tuesday close.
Saddled with $5.1 billion in debt, Arch Coal is grappling with a commodity-price downturn that has forced other U.S. coal producers, including Walter Energy Inc. and Patriot Coal Corp., into bankruptcy this year.
Lenders of the blocking group also claimed that an incremental loan Arch Coal wanted to raise as part of the deal was a breach of the credit agreement. The creditors directed Bank of America Corp., the agent for the debt at the time, not to grant approval for the swap, Arch Coal said in a statement.
Bank of America resigned as agent at the end of July. The lenders are interviewing for a replacement and ire close to picking Wilmington Trust NA for the role, people with knowledge of the matter said last week.
Arch Coal’s $1 billion 7.25 percent senior unsecured bonds maturing June 2021 last traded at 8.63 cents on the dollar on Aug. 17, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt has lost 67 percent this year.