St. Louis based coal company
Arch Coal Inc.
) announced that it will offer 9.875% senior notes worth $375
million due 2019. The interest is payable on the 15th of June and
December each year. The yield-to-maturity from this issuance is
set at 10.75% with the first interest scheduled for June 15,
The offering was increased to $375 million from the initially
announced $350 million on strong investor demand. The offering of
notes is expected to be completely guaranteed by Arch Coal and
its key business wings under the company's senior secured credit
Arch Coal's debt-to-equity ratio at the end of the third
quarter 2012 was 141.1%, which rose sharply from 105.2% at
year-end 2011. Interest expenses of the partnership in the third
quarter 2012 were $74.3 million which could increase in the
following quarters with the currently proposed issuance.
The company is often engaged in issuance activities for the
purpose of financing its debt obligations and for meeting capital
requirements. Previously Arch Coal's subsidiary, Arch Western
Finance, LLC, successfully redeemed all of its $450 million,
6.75% senior notes due 2013.
The partnership's long-term debt level as of September 30,
2012, was $4.5 billion, up from $3.8 billion at the end of
December 2011. Standard & Poor Rating Services and Fitch's
have assigned B+ and B ratings, respectively, to the notes
implying skepticism regarding the company's ability to meet its
financial commitments depending upon the current economic
environment. However, a strong liquidity profile should help the
company in weathering the tough U.S. market conditions.
The Zacks Consensus Estimates for the fourth quarter and full
year 2012 are currently pegged at a loss of 12 cents and 31 cents
per share, respectively. Arch Coal's closest peer,
Consol Energy Inc.
), is expected to remain stable with its low-cost coal operations
and hardened focus on expansion of its natural gas business.
Arch Coal has a short-term Zacks #3 Rank (Hold rating). It
engages in the production and sale of steam and metallurgical
coal from surface and underground mines located in the United
ARCH COAL INC (ACI): Free Stock Analysis
CONSOL ENERGY (CNX): Free Stock Analysis
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