COMPANY ACTIVITY

Arch super-sizes loan

STRONG investor interest in a $US1 billion term loan for Arch Coal has allowed the company to ups...

Lou Caruana
Arch super-sizes loan

Arch has also finalized its amended senior secured revolving credit facility which modifies certain financial covenants to provide incremental flexibility over the next two years.

Under the terms of the agreements, the upsized term loan will reduce the revolving credit facility to $600 million from $1.0 billion, Arch senior vice president and chief financial officer John T. Drexler said.

Arch expects to have cash on hand in excess of $500 million after paying off debts and redeeming outstanding notes.

"Arch has proactively secured a new term loan and amended our credit facility to enhance our liquidity, simplify our capital structure and extend our debt maturities," Drexler said. "The increased term loan, with its long-term pre-payable debt at attractive rates, and the amended credit facility substantially enhance the company's financial flexibility."

Arch intends to use the proceeds from the term loan to repurchase or redeem the outstanding Arch Western Finance $450 million senior notes due 2013, repay borrowings under existing credit facilities, pay certain expenses associated with the transaction and for general corporate purposes.

The term loan will carry an interest rate of LIBOR plus 4.5% initially, and can step down to LIBOR plus 4.25% after 12 months, subject to certain conditions.

The interest rate on the amended credit facility will be based on a senior secured leverage ratio, and set initially at LIBOR plus 4% with a 75 basis point commitment fee. The term loan will be subject to a LIBOR floor of 1.25%, while there will be no LIBOR floor on the credit facility.

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