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View all search resultsMoody's downgrades Berau Coal Energy to B3
Moodyâs Investors Service has downgraded the corporate family rating of publicly listed coal miner PT Berau Coal Energy (BCE) from B2 to B3
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M
oody's Investors Service has downgraded the corporate family rating of publicly listed coal miner PT Berau Coal Energy (BCE) from B2 to B3.
The rating agency has also downgraded the senior secured ratings on the bonds issued by BCE and the company's Singapore-listed subsidiary Berau Capital Resources Pte Ltd, which are guaranteed by BCE.
The downgrades had affected an approximately US$950 million of rated debt, Moody's said. At the same time, the rating agency placed all ratings on review for possible downgrade.
Moody's vice president and senior analyst Brian Grieser said the downgrade of BCE's corporate family rating to B3 reflected the company's weakening liquidity profile.
'The downgrade also reflects our view that the persistent decline in thermal coal prices will lead to the company's declining material earnings and cash flow next year,' he said in a press statement on Thursday.
Moody's said that the benchmark Newcastle thermal coal price index had plummeted 25 percent to a five-year low of $63 per metric ton this year due to weakening demand and chronic oversupply of coal inventories.
Moody's projects that the absence of material improvement in future coal prices will affect BCE's earnings before interest, tax, depreciation and amortization (EBITDA), which will fall below $200 million this year and approach $150 million next year, despite the company's success in reducing its mining costs in 2014 and 2015.
Grieser said BCE's weakened credit profile was also shadowed by a heightened risk to its plans to refinance its $450 million senior secured notes that would mature in July next year following the company's unsuccessful bond deal in August.
According to Moody's, BCE had $343 million in cash balances in the first half of this year. This amount would provide some flexibility in the company's attempts to refinance its bond, but it was insufficient to fully refinance the maturing one, Grieser added.
Grieser said the next Moody's review, which would likely be completed over the next 60 to 90 days, would focus on BCE's ability to successfully refinance the upcoming maturity and provide full recovery to existing bondholders.
'BCE could face further downgrades if the bonds have not been refinanced in the review period. Moody's can also view a refinancing strategy that does not meet BCE's original obligation to bondholders as a distressed exchange under Moody's definition of default,' he said.
BCE controls a 90 percent share in PT Berau Coal, the country's fifth-largest producer and exporter of thermal coal. Berau operates three active mines ' Lati, Sambarata and Binungan ' at a single site in East Kalimantan and is estimated to have resources of about 2.2 billion tons, with probable and proven reserves estimated at 509 million tons.
