OREANDA-NEWS. S&P Global Ratings said today it lowered its corporate credit rating on U. S.-based Armstrong Energy Inc. to 'CCC+' from 'B-'. The outlook is negative.

At the same time, we lowered our issue-level rating on Armstrong's senior secured notes to 'CCC+' from 'B-'. We also revised the recovery rating on the debt to '4' from '3', indicating our expectation for average (30% to 50%; lower end of the range) recovery in the event of a payment default.

"The negative outlook reflects our view that the company is likely to pursue a distressed exchange or debt restructuring within the next 12 months," said S&P Global Ratings credit analyst Vania Dimova. "We anticipate that free operating cash flow will remain negative, which will continue to erode liquidity, and the company disclosed that it has retained strategic advisers to explore restructuring its debt obligations."

We would lower the rating if the company pursued an exchange offer or debt restructuring or if liquidity deteriorated such that we anticipated a default within 12 months without an unforeseen positive development.

We would revise the outlook to stable if we believed that the company was no longer likely to pursue a debt restructuring and liquidity remained adequate. This could happen if end market demand and prices materially improve from current levels.