Arch Coal completes $1.4B term loan, amends credit facility

Arch Coal Inc. (NYSE: ACI) on May 16 said it has completed a new $1.4 billion term loan that was upsized from $1 billion due to strong investor interest.

Further, the company finalized its amended senior secured revolving credit facility, as previously planned, 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.

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.

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

Upon completion of these efforts, Arch Coal said it expects to have cash on hand in excess of $500 million.

“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,” Arch Coal Senior Vice President and CFO John T. 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.”