Arch Coal sees outlook downgraded to ‘negative’

St. Louis-based coal producer Arch Coal has seen its outlook reduced from “Stable” to “Negative” by Standard & Poor’s Ratings Services.

AP reports that S&P announced the ratings change on Wednesday while also affirming the coal producer’s “B+” corporate credit rating and assigning a “B-” rating with a recovery rating of “6” to the company’s proposed $350 million senior unsecured notes which are due in 2019.

Fitch Ratings also announced on Tuesday that it had reduced its issuer default rating for Arch to “B” from “B+” on the grounds of the company’s increased debt burden and surplus coal in certain areas of the market.

The global ratings agency also cut its rating for Arch Coal’s senior unsecured notes to “B” from B+.”

Coal producers around the globe have been hard hit this year by sharp declines in spot prices as growth eased in China and demand dwindled. US coal producers have been further hampered by the increasing preference of utilities for natural gas on the grounds of cheaper prices.

S&P notes that although the additional debt will compromise the company’s credit profile, the increased cash flow will enable Arch to weather adverse market conditions should they persist for the next several years.