Arch Coal, Inc
) continue to gain following the company's announcement of its
efforts to better financial flexibility. Shares gained nearly
5.1% over the last two days.
Arch Coal intends to increase the term loan facility by $300
million to $1.95 billion from $1.65 billion Term Loan B. Arch
Coal also intends to eliminate certain financial covenants
governing its senior secured credit facility. As a result,
commitments under that facility would be reduced from $350
million to $250 million. These efforts are expected to enhance
the financial flexibility of Arch Coal.
Arch Coal also announced a cash tender offer for its outstanding
8.75% $600 million Senior Notes due 2016. The prepayment is
intended to lower the interest burden of the company. Arch Coal's
financial position is strong enough to fund the prepayment.
Earlier, the company had issued notes of lower coupon rate
to fund redemption of notes bearing a higher coupon rate. This is
a prudent approach that not only lowers the interest burden but
also allows sufficient liquidity over a longer period.
One of the primary objectives of every business firm is to
effectively lower its cost of capital in order to improve
profitability. Moreover, the funds raised will allow the company
to invest in infrastructure-related programs for a longer period
of time at a cheaper cost.
Arch Coal's long-term debt at the end of third-quarter 2013
totaled $5.07 billion, down 0.2% from 2012-end level. With the
restructuring of the debt profile, the debt balance is expected
to improve further.
Arch Coal presently carries a Zacks Rank #3 (Hold). However,
better-ranked stocks in the same sector include
Alpha Natural Resources, Inc
Suncoke Energy Partners, L.P.
Cliffs Natural Resources Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
ARCH COAL INC (ACI): Free Stock Analysis
ALPHA NATRL RES (ANR): Free Stock Analysis
CLIFFS NATURAL (CLF): Free Stock Analysis
SUNCOKE ENERGY (SXCP): Free Stock Analysis
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