Moody’s downgrades Arch Coal

Moody’s Investors Service said it downgraded Arch Coal, Inc.’s corporate family rating to C from Caa3 and probability of default rating to D-PD from Caa3-PD.

Moody’s also said it downgraded the company’s first-lien term loan to C from Caa1, second-lien notes to C from Caa3 and senior unsecured notes to C from Ca.

The downgrades were prompted by news that Arch and certain of its wholly owned subsidiaries have filed Jan. 11 for relief under Ch. 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the Eastern District of Missouri, the agency said.

Subsequent to today’s actions, Moody’s said it will withdraw all ratings and outlook on the company.

The ratings reflect a very low expected recovery for the creditors, Moody’s said.

The company indicated that the restructuring transaction is expected to eliminate more than $4.5 billion in debt, the agency added.

As of Sept., 30, the company carried more than $5.1 billion in debt, Moody’s said.

The company faces continued stress in the coal sector and a capital structure that is untenable in the current commodity-price environment without restructuring, the agency said.

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