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S&P downgrades Arch Coal, rates loan BB
Standard & Poor's said it lowered the corporate credit rating on Arch Coal, Inc. to B+ from BB-, along with its senior unsecured notes rating to B- from B+.
The recovery rating also was revised to 6, which indicates 0% to 10% expected recovery in a default, from 5.
These actions reflect an expectation that the company will fully repay senior unsecured notes issued by the Arch Western Finance LLC subsidiary, S&P said.
S&P also said it assigned a BB rating and 1 recovery rating to the company's proposed $2 billion senior secured bank credit facility, which includes a $1 billion revolver and a $1 billion term loan.
The 1 recovery rating indicates 90% to 100% expected recovery in a default.
The ratings also were removed from CreditWatch, where they were placed with negative implications in April.
The downgrade reflects an expectation that 2012 and 2013 EBITDA will be much lower than previously anticipated because of a sharp cyclical downturn in domestic coal demand, S&P said.
A mild winter and natural gas substitution has hurt the thermal coal market, the agency said.
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