S&P Cuts Arch Coal (ACI) to 'SD'; Sees Negligible Recovery in Event of Default

Standard & Poor's Ratings Services said it lowered its corporate credit rating on Arch Coal Inc. (NYSE: ACI) to 'SD' from 'CC'. At the same time, we lowered our issue-level ratings on the company's senior unsecured notes to 'D' from 'CC'. The recovery rating on the notes remains '6', which continues to reflect our expectation for negligible (0%-10%) recovery in the event of a conventional default.

We also lowered our issue-level rating on the company's first-lien secured debt to 'CCC' from 'B-'. The recovery rating is unchanged at '2', indicating our expectation for substantial recovery (70%-90%; upper half of the range) in the event of a payment default. In addition, we lowered our issue-level rating on the company's second-lien secured debt to 'C' from 'CCC-'. The recovery rating is unchanged at '6', indicating our expectation for negligible recovery (0%-10%) in the event of a payment default.

"If Arch makes the interest payment within the grace period, we will likely revise the issuer credit rating to 'CCC-'," said Standard & Poor's credit analyst Chiza Vitta. "If the payment is not made, we will consider the likelihood of other interest payments being paid and revise the ratings accordingly."

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