ST. LOUIS, July 29, 2015 /PRNewswire/ -- Arch Coal,
Inc. ("Arch Coal") (NYSE:ACI) previously disclosed that it is
conducting (a) a private offer to exchange (the "2020 Notes
Exchange Offer") new 6.25% Trust Certificates due 2021 (the "Trust
Certificates") issued by a pass-through trust (the "Trust") and a
cash payment for any and all outstanding 7.25% Senior Notes due
2020, and (b) a private offer to exchange (the "Concurrent Exchange
Offer" and, together with the 2020 Notes Exchange Offer, the
"Exchange Offers") Trust Certificates, 8% Senior Secured Notes due
2022 (the "New 2022 Notes") and 12% Senior Secured Second Lien
Notes due 2023 for its outstanding 7% Senior Notes due 2019, 9.875%
Senior Notes due 2019 and 7.25% Senior Notes due 2021.
In order to effectuate the Exchange Offers, Arch Coal intends to
incur incremental term loans (the "New Term Loans") and revolving
loans (the "New Revolving Loans") under Arch Coal's Amended and
Restated Credit Agreement dated as of June
14, 2011 (as amended, restated, modified or supplemented
from time to time, the "Credit Agreement"). In connection
with such incurrence and other transactions contemplated by the
Exchange Offers, the administrative agent in respect of the term
loan facility under the Credit Agreement (the "Term Loan
Administrative Agent") must take certain actions, including
executing an incremental joinder establishing such New Term Loans
and approving an intercreditor agreement establishing the relative
priority of the liens securing the Credit Agreement and the liens
securing the New 2022 Notes (the "New Intercreditor
Agreement"). In addition, it is anticipated that certain
provisions in the Credit Agreement relating solely to the revolving
loans thereunder will be amended upon consummation of the Exchange
Offers (the "Proposed Revolver Amendments"). Finally, a new
collateral agent under the Credit Agreement will be
appointed.
On July 28, 2015, certain
unidentified term loan lenders under the Credit Agreement
purporting to hold more than 50% of the term loans under the Credit
Agreement delivered a letter to the Term Loan Administrative Agent
directing the Term Loan Administrative Agent to refrain from
executing documentation relating to the Exchange Offers and the
establishment of the New Term Loans, approving the New
Intercreditor Agreement and certain other documentation and
appointing a new collateral agent under the Credit Agreement.
No approval by or consent of the existing term loan lenders is
required in connection with the contemplated
transactions.
In addition, the letter includes certain other assertions
regarding the Exchange Offers, the Proposed Revolver Amendments,
the New Intercreditor Agreement and the existence of a default
under the Credit Agreement, as more fully set forth below.
Arch Coal has evaluated the assertions made in the letter and
believes they are without merit, as set forth below.
First, the letter asserts that the Proposed Revolver Amendments
require consent of a majority of all lenders under the Credit
Agreement. However, this assertion is incorrect, as under
Section 11.1A of the Credit Agreement, the Proposed Revolver
Amendments require the consent of only a majority of lenders making
revolving loans, as the Credit Agreement explicitly provides that
"in respect of any modifications, amendments or waivers that relate
to provisions that only affect the Revolving Credit Lenders . . .
such modifications, amendments or waivers shall require only the
written consent of the Revolver Required Lenders."
Second, the letter asserts that the New Term Loans trigger the
"most favored nation" provisions in the Credit Agreement because
the effective yield under the New Term Loans is more than 50 basis
points higher than the effective yield applicable to the existing
term loans. However, the effective yield of the New Term
Loans (as calculated under the Credit Agreement) will not exceed
the effective yield applicable to the existing term loans by any
amount. The definition of "Effective Yield" under the Credit
Agreement takes into consideration only "applicable interest rate
margins, interest rate benchmark floors and all fees, including
recurring, up-front or similar fees or original issue discount
(amortized over four years following the date of incurrence thereof
…) payable generally to the lenders making such Class of
Loans…." The interest rate for the New Term Loans is 6.25%
and there are no fees (including recurring, up-front or similar
fees or original issue discount fees) associated with the New Term
Loans. Additionally, given that Arch Coal is exchanging more
than $367 million of existing debt at
a substantially higher interest rate for $154 million of New Term Loans with a lower
interest rate and $22 million of
cash, there is clearly no original issue discount in the nature of
fees associated with the Exchange Offers.
Third, the letter asserts that the Credit Agreement does not
allow the New Term Loans to be borrowed in a transaction for
non-cash consideration. However, there is no provision in the
Credit Agreement requiring that a borrowing of New Term Loans must
be funded in cash by the lender thereof, and such lenders therefore
were unable to cite any such provision.
Fourth, the letter asserts that Arch Coal is in default under
the Credit Agreement for failure to pay previously invoiced legal
expenses of counsel to a group of lenders under the Credit
Agreement. However, the Credit Agreement provides that
a lender is entitled to reimbursement of "reasonable out-of-pocket
expenses" only "in connection with the enforcement or protection of
its rights" in connection with the Credit Agreement or the loans,
including such expenses "incurred during any workout restructuring
or negotiations" with respect to the loans. Given that (i)
invoices received cover a time period prior to the public
announcement of the Exchange Offers (or any transactions), and (ii)
the Exchange Offers are permitted by the Credit Agreement, Arch
Coal has no obligation for fee reimbursement for counsel to the
term loan lenders. Moreover, the invoice received for
work performed in June prior to the announcement of the Exchange
Offers is patently unreasonable and exceeds by a significant margin
the invoices submitted by the Term Loan Agent itself for the same
time period, who is required to take action under the proposed
documentation.
Fifth, the letter asserts that the New Intercreditor Agreement
is not acceptable to such lenders. This assertion is
irrelevant, as the Credit Agreement requires intercreditor
documentation "acceptable to the Administrative Agents in
their sole discretion." Therefore, whether the lenders find the
form acceptable is not relevant under the Credit Agreement.
In addition, the Intercreditor Agreement form is identical to
the one previously approved for use with the Company's existing
junior lien debt.
Sixth, the letter asserts that the proposed replacement of the
collateral agent is not acceptable to such lenders. This
assertion is irrelevant, as the Credit Agreement says "the
Administrative Agents shall have the right, with the approval from
the Borrower . . . to appoint a successor, such approval not to be
unreasonably withheld or delayed." Accordingly, the lenders'
view on the successor collateral agent is irrelevant under the
Credit Agreement. Given that the collateral agent is a well
regarded national bank, Arch Coal also believes any such objection
would be unreasonable.
While Arch Coal believes that the assertions and directions set
forth above and are without merit, and intends to contest them
vigorously, it cannot predict what effect the assertions and
direction set forth in the letter, or any future claims, might have
on the Exchange Offers. In particular, if the Term Loan
Administrative Agent elects to follow the direction embodied in the
letter, the Exchange Offers would not be consummated. Arch Coal has
expressly reserved all of its rights against the lenders who sent
such letter.
U.S.-based Arch Coal, Inc. is one of the world's top coal
producers for the global steel and power generation industries,
serving customers on five continents. Its network of mining
complexes is the most diversified in the
United States, spanning every major coal basin in the
nation. Arch controls more than 5 billion tons of
high-quality metallurgical and thermal coal reserves, with access
to major railroads, inland waterways and a growing number of
seaborne trade channels.
Forward-Looking Statements: This press release contains
"forward-looking statements" – that is, statements related to
future, not past, events. In this context, forward-looking
statements often address our expected future business and financial
performance, and often contain words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," or
"will." Forward-looking statements by their nature address
matters that are, to varying degrees, uncertain. For us,
particular uncertainties arise from changes in the demand for our
coal by the domestic electric generation industry; from legislation
and regulations relating to the Clean Air Act and other
environmental initiatives; from operational, geological, permit,
labor and weather-related factors; from fluctuations in the amount
of cash we generate from operations; from future integration of
acquired businesses; and from many other matters of national,
regional and global scale, including those of a political,
economic, business, competitive or regulatory nature. These
uncertainties may cause our actual future results to be materially
different than those expressed in our forward-looking
statements. We do not undertake to update our forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required by law. For a
description of some of the risks and uncertainties that may affect
our future results, you should see the risk factors described from
time to time in the reports we file with the Securities and
Exchange Commission.
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SOURCE Arch Coal, Inc.