Fitch Ratings has downgraded Peabody Energy’s long-term Issuer Default Rating (IDR) to ‘CC’ from ‘CCC’. Approximately $8.4 billion in face amount of obligations is affected by the rating actions.

Fitch said the downgrade of the IDR reflects Fitch’s view that default of some kind appears probable following increased demands on liquidity, negotiations with creditors for a distressed debt exchange, continued competition in domestic markets from cheap natural gas and bankrupt coal producers, expectation of a delayed recovery in the seaborne metallurgical coal market from very low levels, and prospects for further weakness in the Asia Pacific steam coal markets.

The downgrade of the second lien notes reflects their position in the capital structure after the $1.7 billion revolver, the $1.3 billion term loan, and letters of credit secured by receivables as well as Fitch’s assumptions for lower going concern EBITDA and lower enterprise value multiples.