Creditor Sues Arch Coal's Lenders

A creditor of Arch Coal Inc has sued a group of lenders alleging they are trying to use the struggling U.S. miner's credit agreement to block its out-of-court restructuring efforts and push it into bankruptcy.

GSO Special Situations Master Fund LP, which holds some of Arch Coal's unsecured notes, has sought a temporary restraining order against the lenders.

Arch Coal's restructuring plan includes a private debt exchange offer to swap existing senior notes for longer term securities.

The company had announced the exchange offer in July and had extended, multiple times, the deadline for completion, which is now Sept. 23.

GSO, a part of private equity firm Blackstone Group LP , said the defendants are using "improper and legally unsupportable efforts" to block the swap and if the restructuring plan fails, it is nearly certain the company would file for bankruptcy.

The exchange plan complies with the provisions in the credit agreement that the company may issue an additional secured debt of $400 million, as long as incremental term loans do not exceed $150 million and the total debt does not exceed $2.3 billion, GSO said in the filing.

The transaction is expected to help the company reduce its total debt by almost 20 percent and its annual interest expense by more than 20 percent, it said.

Coal producers including Arch Coal have been under pressure as power utilities switch to cheaper natural gas and big consumers such as China reduce imports.

Arch Coal officials or GSO Capital Partners LP were not immediately available for comment.

The case has been filed in the New York State Supreme Court dated Sept. 16 and Index no.- 653110/2015. (Reporting by Sangameswaran.S