Arch Coal (ACI) recently extended the size and maturity of its senior secured revolving credit facility. The existing drawing limit under the credit line was raised to $860 million from $800 million through June 2011.
From June 2011, the company will have borrowing right of $763 million through March 2013, which may further be raised up to $800 million. The credit line extension will strengthen Arch Coal’s liquidity position and provide greater financial flexibility to pursue attractive growth opportunities going forward.
Last week, the company obtained clearance from the Federal Trade Commission (FTC) for acquiring the Jacobs Ranch mine in Wyoming from Rio Tinto (RTP). The $761 million deal will give Arch Coal control over around 381 million tons of high-grade, low-cost coal reserves adjacent to its Black Thunder mine and several operating synergies that will provide significant value for it shareholders. Last month, it had raised about $897.5 million vide debt and equity offering to fund the acquisition.
Timely production cuts and rational capex plans will help Arch Coal benefit from the recovery in coal demand once the global economy stabilizes. Shares of the company closed at $17.72 on Monday, trading at 14.0X trailing 12-month EPS versus 19.8X of the peer group. We maintain our Outperform recommendation for the company.
Read the full analyst report on “ACI”
Read the full analyst report on “RTP”
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