Moody's downgrades Armstrong

Moody's Investors Service said it downgraded the ratings of Armstrong Energy, Inc., including its corporate family rating to Ca from Caa1, probability of default rating to D-PD from Caa1-PD and the rating on the senior secured notes to Ca (LGD 3) from Caa2 (LGD 4).

The outlook is negative.

The action follows news that the company entered into a forbearance agreement with the holders of about $158 million in aggregate principal amount of the company's senior secured notes due 2019, Moody's said.

Under the agreement, the noteholders will not exercise their rights with respect to the company's failure to make its June 15 interest payment upon the expiration of the 30-day grace period until the earlier of Aug. 14, the agency said, or a certain termination event as defined in a Ch. 11 bankruptcy filing.

The ratings reflect interest payment default on the debt and a view of a relatively low recovery for lenders in the event of restructuring, Moody's said.

The company is engaged in discussions with its lenders regarding ways to address the missed interest payment, as well as potential transactions to improve liquidity and capital structure, the agency said.

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