Arch Coal Inc. has failed to pick up widespread support for its chapter 11 exit plan, according to a newly revised version of the plan filed in bankruptcy court Wednesday.
In a release, Arch said the revised bankruptcy emergence plan is supported by more than two-thirds of its senior secured lenders.
In court papers, Arch revealed it has failed to broker agreement between the lenders and unsecured creditors, including bondholders owed upward of $4 billion. As a result, the coal company is still looking at a fight when it comes to pushing its exit plan through bankruptcy court.
The new plan offers unsecured creditors some cash in addition to a share of assets that aren’t already claimed by senior lenders. The cash offer diminishes if junior creditors make good on a threat to sue some Arch lenders for allegedly wrongfully blocking efforts to restructure the company’s debts out of bankruptcy.
In a separate court filing Tuesday, unsecured creditors asked for the court’s permission to move ahead quickly with the litigation, which challenges the authority of lenders that balked at prebankruptcy restructuring efforts, and calls into question the validity of lender liens.
Debt exchange offers Arch put together last year would have cut $1 billion out of the company’s debt, and stretched out the maturities on loans, potentially saving the company from bankruptcy, according to lawyers for unsecured creditors.
However, some lenders blocked the exchanges, “intentionally and unlawfully” pushing Arch into bankruptcy, creditors contend.
In chapter 11 plan documents, Arch said it wants to settle the brewing dispute, and lenders have offered to waive certain of their claims to put the matter behind them.
Revised plan documents Arch filed Wednesday fill in some of the blanks in earlier versions of the plan. Arch estimates that the debt and reorganized company stock being offered to first-lien lenders owed nearly $1.9 billion translates into a recovery from 37% to 60% of what they are owed.
Unsecured creditors owed $4.4 billion to $4.9 billion are being asked to accept less than a penny on the dollar of what they are owed, new plan documents say.
Arch sought chapter 11 protection in January, one of many debt-laden coal operators brought down by changed market conditions. It had the support of some senior lenders for a restructuring, and has been engaged in talks aimed at bringing unsecured creditors on board. Those talks continue, court papers say.
