S&P raises Arch Resources

S&P said it raised its ratings for Arch Resources Inc. to B+ from B and its senior secured debt to BB from BB-. The 1 recovery rating on the debt is unchanged, indicating very high (90%-100%; rounded estimate: 95%) recovery in default.

“Arch's adjusted leverage cushion is strong enough to absorb a 65% drop in EBITDA and remain below 1x. Although we expect adjusted earnings to soften in 2023 due to our assumption of declining commodity prices, Arch's leverage will most likely remain below 1x given the significant reduction in the company's adjusted debt. Arch's adjusted debt declined by 54% to $457 million as of Dec. 31, 2022, compared with close to $1 billion in the previous year,” S&P said in a press release.

The agency noted that in fiscal 2022, the company voluntarily repaid $274 million of its term loan due 2024 ($6.5 million outstanding as of Dec. 31, 2022) and redeemed $142 million of its convertible notes due 2025 ($13.2 million outstanding as of Dec. 31, 2022). Arch also contributed $136 million into a fund earmarked for final mine closure reclamation activities, which reduces its asset retirement obligations.

The outlook is stable.

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