Arch Coal Inc. has picked up the support of its unsecured creditors for a chapter 11 turnaround plan, ending the threat of litigation over the coal operator’s failed efforts to stay out of bankruptcy, the Wall Street Journal reported today. Talks aimed at reaching a deal have been under way for sometime. New terms sketched out on Friday outline settlements that could ease the company’s path out of chapter 11. Unsecured bondholders are being offered cash and stock under the amended plan, which is slated for preliminary review on Wednesday at a bankruptcy court in St. Louis. Court papers filed Friday show the new plan is the result of a compromise that will see senior lenders and senior management pitching in to the pool of assets to be distributed to unsecured creditors. Last year, Arch tried to cut its debt load outside of bankruptcy by way of an exchange offer with junior bondholders. Senior lenders blocked the deal, a move that pushed Arch into bankruptcy in January. The filing came as other coal producers also sought court protection to address too much debt and harsh industry conditions. Litigation stemming from the failed debt exchange, as well as the threat of other lawsuits, would be put to rest under Arch’s new chapter 11 plan, according to court papers. Funds managed by Blackstone Group’s GSO Capital Partners, which holds unsecured bond debt, will receive $5 million to settle a lawsuit it filed in May.
