UPDATE: JP Morgan Downgrades Arch Coal to Neutral on High Financing Leverage

JP Morgan downgraded Arch Coal ACI from Overweight to Neutral and lowered the price target from $10.00 to $7.00. JP Morgan said, "Declining met coal prices were the primary driver of $231m in write-downs as new CEO John Eaves prepares the company for a difficult H1 2013 and hopes for a H2 recovery. …. We estimate the company will generate $404m of EBITDA in 2013 and could come close to its senior secured leverage covenant of 3.5x risking dilution. With about 30mt of spare production capacity in the PRB, we are concerned that coal prices could be capped and this makes ACI vulnerable if the coal price recovery is delayed." Arch Coal closed at $6.04 on Tuesday.