Arch Coal launches $1 billion term loan at discount of 98½ to 99

By Sara Rosenberg

New York, May 3 - Arch Coal Inc. launched its $1 billion six-year covenant-light senior secured term loan (NA/NA/BB) on Thursday at an original issue discount of 98½ to 99, according to sources.

Price talk on the loan is Libor plus 450 basis points with a 1.25% Libor floor, in line with what the company disclosed in an 8-K recently filed with the Securities and Exchange Commission.

The loan has call protection of 102 in year one and 101 in year two, but up to $500 million of asset sales will be allowed to repay the term loan at par within 18 months form closing, sources said.

Amortization is 1% per annum.

Commitments are due on May 10, sources added.

Bank of America Merrill Lynch, PNC Capital Markets LLC, Morgan Stanley Senior Funding Inc., Citigroup Global Markets Inc., RBS Securities Inc., BMO Capital Markets Corp. and Union Bank are the lead arrangers and bookrunners on the deal.

Proceeds will be used to fund the tender offer for the $450 million of 6¾% senior notes due 2013 at Arch Western Finance LLC, to pay down outstanding revolver debt and to provide additional liquidity for ongoing business needs.

The tender offer expires on May 29.

In addition, the company has reached an agreement on an amendment to its existing senior secured revolver to allow for the new term loan.

The amendment would also reduce revolver borrowing capacity to $1 billion in exchange for relief from certain financial covenants over the next two years.

PNC is the lead on the revolver.

Arch Coal is a St Louis-based coal producer and marketer.

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