Struggling U.S. coal miner Foresight Energy LP and a group of bondholders are closing in on a deal in which billionaire founder Chris Cline would inject cash to repay the creditors, according to people with knowledge of the matter.
The company, which received an extension until April 15 to resolve the dispute with bondholders who claim they are owed more than $600 million, needs an agreement to help stave off bankruptcy amid the worst coal downturn in decades.
Under the deal being discussed, Cline would buy some or all of that debt, said the people, who asked not to be named because the discussions are private. Cline may also invest capital in Foresight’s part-owner Murray Energy Corp., the people said.
A group of the miner’s senior secured debt holders are seeking a consent fee to agree to any terms, the people said. The latest discussions between Foresight and its bondholders are still evolving and may fail, the people said.
Foresight hired PJT Partners Inc. and Paul Weiss Rifkind Wharton & Garrison as advisers, said the people. The bondholders are being advised by Houlihan Lokey Inc. and Strook Strook & Lavan. Goldman Sachs Group Inc. is advising Murray Energy, said the people.
Jason Margherio, a spokesman for Foresight, and Gary Broadbent, a spokesman for Murray, declined to comment. Also, Michael Duvally at Goldman Sachs and John Gallagher at Houlihan Lokey declined to comment. Madeleine O’Hagan for PJT at Joele Frank, Lauren Nussbaum at Paul Weiss and Robin Wagge for Strook Strook, didn’t respond to requests seeking comment.
Foresight shares rose 49 percent to $1.83 at 11:48 a.m. in New York, after touching $1.98 for the biggest intraday gain since it went public in June 2014.
The company’s dispute with bondholders led by DDJ Capital Management and BlueMountain Capital Management began after Murray bought a 50 percent stake in Foresight a year ago. The creditors argue that the acquisition amounted to a change of control, which, under Foresight’s lending contracts, would require the company to repay, at a premium, its $600 million of 7.875 percent senior unsecured notes maturing in August 2021.
Murray and Foresight said in a press release last April that no change in control would occur from the transaction. But in December, a Delaware judge ruled that it had and ordered Foresight to negotiate with bondholders.
Foresight has been trying to restructure its debt outside of court as it works to avert bankruptcy after defaulting on several fronts. Mining giants including Alpha Natural Resources Inc. and Arch Coal Inc. have already filed for bankruptcy as coal prices plunged 75 percent since 2011 amid mounting environmental regulations, weakening demand abroad and cheap natural gas.