J.P. Morgan Maintains Overweight on Arch Coal

J.P. Morgan is out with its report today on Arch Coal ACI, maintaining Overweight. In a note to clients, J.P. Morgan writes, "Arch has announced its funding package for its purchase of International Coal Group. It will need $3.85bn in total to buy the 225m ICO shares (including convertibles) plus refinance debt. This is in line with the guidance for a mix of 75% debt financing and 25% equity and should allow Arch to retain its Ba3 and BB- debt ratings. This deal allows Arch to increase its coking coal production and leverage its balance sheet. This deal is likely to be dilutive prior to the new Tygart mine ramping up in 2014 and should then become accretive. The original deal announcement was well received by the market, and assuming European debt problems are resolved, this could be a good entry point for new investors." Shares of ACI closed Tuesday at $29.89, up 0.98% from Friday's close.