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UPDATE 1-Whitehaven looks to extend $1.15 bln debt due to coal mine delay

Thursday, 24 Oct 2013 | 10:01 PM ET

* Whitehaven in talks to extend covenant holiday, 4-year tenor

* CEO says has received positive reaction from lenders

* CEO confident judge will reject green challenge to key project

(Adds CEO comment)

MELBOURNE, Oct 25 (Reuters) - Whitehaven Coal, Australia's second largest independent coal miner, is talking to lenders about restructuring a A$1.2 billion ($1.15 billion) debt facility due to delays in building its key growth project, Maules Creek, the firm said on Friday.

Lenders had given Whitehaven a covenant holiday on the loan until December 2014, which was meant to give it a three-month buffer from the start of sales from the Maules Creek mine in New South Wales state.

During a covenant holiday, a borrower does not need to meet loan conditions such as targets for earnings-to-interest ratios that lenders impose to ensure the borrower does not default.

Due to delays in seeking government approvals for the mine, which the firm now has, and an environmental court challenge, due to be ruled on in December, first sales from the project are now expected only in the first quarter of 2015 at best.

So the company is seeking to push out the covenant holiday and at the same time is talking to lenders about extending the tenor of the loan from four years in case there are any other hitches, Managing Director Paul Flynn told analysts on Friday.

Under the original facility agreed in November 2012, the company was not going to face covenant tests until December 31, 2014, which was based on the expectation that Whitehaven would have had three months of revenue from Maules Creek by then.

However, due to the approval delay and last-minute court challenge, the company now expects sales to begin from Maules Creek only in the first quarter of 2015.

"We're looking to realign that covenant testing with that revised timeframe," he said, adding that the restructure would involve a "modest" cost.

"We've received very positive feedback from all the major lenders in our lending syndicate," Flynn said. "Our view is this is not a big deal."

The four lead lenders are ANZ, Commonwealth Bank of Australia, Macquarie Group and National Australia Bank.

Whitehaven expects the Federal Court will reject a challenge by an environmental group against Canberra's approval of the Maules Creek project, after the court refused to impose an injunction to halt work on the project pending that ruling.

"We're confident. There's no doubt about that. Our view is that the judge in the injunction hearing has signposted views that will apply in the underlying hearing," Flynn said.

The Northern Inland Council for the Environment, which launched the challenge, is concerned that Maules Creek, an open-pit mine, will destroy forests, deplete groundwater and spread coal dust on farms.

Maules Creek is 15-percent owned by Japanese trading house Itochu Corp and 10-percent owned by Japan's Electric Power Development Co (J-Power), which has an agreement to take coal from the mine.

Whitehaven's shares have halved in value this year due to delays in the Maules Creek project, ramp-up problems at its Narrabri mine and a sharp slump in coal prices. But the stock rose 3.5 percent to A$1.795 on Friday after a strong quarterly production report.

The company reported a 26 percent jump in equity coal sales to 2.03 million tonnes for the September quarter, and said it had overcome coal quality problems that had earlier resulted in some customers rejecting its product or paying less for it.

Flynn said softness appeared to have abated in the market for thermal coal, used in power stations, with prices now around $80, just above four-year lows.

($1 = 1.0426 Australian dollars)

(Reporting by Sonali Paul; Editing by Ed Davies and Joseph Radford)