S&P Global Ratings downgraded Peabody Energy Corp.'s credit rating to CC from CCC- and its issue-level rating on the company's senior secured notes due 2022 to CC from CCC-.

The downgrade is a reaction to the coal producer's recent extension of an early exchange offer for the notes that stripped nonparticipating lenders, which hold about 13.4% of the notes, of collateral securing the notes. The distressed debt exchange is "tantamount to a default," S&P Global Ratings analysts wrote.

The analysts said that while participating debt holders will receive compensation in exchange for lengthening the deadline to pay off the notes, a substantial number of the lenders will receive less than they were originally promised. The analysts expect to further lower Peabody's credit rating to SD, or selective default, once the exchange offer is completed. The rating on the notes would drop to D at that time.

Once the exchange transaction is closed, S&P Global Ratings analysts wrote that they expect to raise the issuer credit rating on Peabody to CCC+ and raise the ratings on the existing term loan and 2025 senior notes to CCC. The analysts added that they also expect to raise the rating on the 2022 notes that did not participate in the debt exchange to CCC-.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.