A New York state judge has sided with a group of lenders that are blocking an Arch Coal Inc. debt-swap deal, effectively halting a transaction that advocates have said would keep the coal company out of bankruptcy, the Wall Street Journal reported today. Judge Saliann Scarpulla of the New York State Supreme Court denied a request by an affiliate of GSO Capital Partners that she prevent a group of majority lenders from freezing the debt swap. The standard for granting such a request is that the judge must find that allowing the lenders to proceed would do “irreparable harm.” She didn’t find that to be the case. “Because I find that Plaintiff’s alleged harm can be fully compensated by money damages by the Directing Defendants, Plaintiff’s harm is not irreparable. Plaintiff argues that, if Arch enters bankruptcy, any claim for money damages against the Directing Defendants would be more complex to prove. This, however, is not sufficient to establish irreparable harm,” she said in her ruling issued on Friday. Arch Coal, one of the country’s largest coal producers, is trying to get creditors to swap their debt in exchanges designed to improve Arch’s balance sheet as the coal market faces continued weakness.
