OREANDA-NEWS. Standard & Poor's (S&P) joined Fitch Ratings in downgrading some of Arch Coal's debt following the company's offer to exchange $2.875bn in unsecured bonds for less than half that amount in secured debt and cash.

S&P lowered Arch's corporate credit rating by one notch to CC from CCC+. The ratings service also lowered its issue-level ratings on the company's senior unsecured notes to CC from CCC-, but affirmed the issue-level ratings on the senior secured debt remain unchanged.

The CCC rating defines Arch as "currently vulnerable" and "dependent upon favorable business, financial and economic conditions to meet its financial commitments."

"We are lowering our corporate credit rating on the company and issue-level ratings on its senior unsecured debt because we view the related transactions to be distressed, according to our criteria," S&P said. "

S&P's recovery rating on the Arch notes remains a 6, which gives the notes an expectation of 0-10pc recovery in the event of a payment default.

Fitch Ratings also downgraded some of Arch's debt ratings following the unsecured bonds offer.

Arch's exchange offer, which was launched on 2 July, could cut the company's debt to capital ratio to below 70pc from around 77pc now, Fitch said. The offer could also improve the company's funds available for making interest payments over the long term.

The coal producer is offering to exchange $2.375bn in senior notes due in 2019 and 2021 for as much as $400-450 worth of new trust certificates and senior secured debt due 2021-2023 per $1,000 tendered. It also wants to exchange $500mn of senior notes due in 2020 for $418.69 of cash and trust certificates due in 2021 per $1,000 tendered.

The unsecured senior notes have interest rates of 7pc, 7.25pc and 9.875pc. Holders have the option of exchanging the notes due in 2019 and 2021 for senior secured notes with interest rates of 8pc or 12pc or taking trust certificates that pay 6.25pc plus an interest in a new trust.

Holders of Arch's 7.25pc notes due in 2020 can get the 6.25pc trust certificates plus up to $60 in cash per $1,000 tendered.