กรุงเทพฯ--8 ม.ค.--Standard & Poor's
DALLAS (Standard & Poor's) Jan. 7, 2015--Standard & Poor's Ratings Servicestoday raised its corporate credit rating on St. Clairsville, Ohio-based coalproducer Murray Energy Corp. to 'B+' from 'B'. The outlook is stable.
At the same time, we raised our issue-level rating on the company's first-liendebt and other senior secured debt to 'BB' and 'B' from 'BB-' and 'B-',respectively. The recovery rating on the first-lien debt remains '1',indicating our expectation of a very high (90% to 100%) recovery in the eventof a payment default. The recovery rating on other senior secured debt remains'5', indicating our expectation of a modest (10% to 30%) recovery in the eventof a payment default.
"Murray's acquisition of Consol assets has doubled coal production and almosttripled the company's reserve base," said Standard & Poor's credit analystChiza Vitta. One year later, we anticipate elevated levels of EBITDA willbring leverage levels back below 5x going into 2015.
We consider Murray's business risk profile to be "weak" based on the company'sparticipation in the competitive and highly cyclical coal industry. Theassessment reflects current difficult industry conditions and the inherentchallenges of coal mining, which include price volatility, weather-related and
transportation disruptions, and increasingly stringent environmental andsafety regulations. We weigh these risks against Murray's long-term contractedprofile, with more than 65% of cumulative sales volume contracted through2017; widespread use of the low-cost underground longwall mining method; and adiversified geographic profile with mines in three basins, none accounting formore than 18% of total production.
The higher corporate credit rating is primarily the result of our expectationof improved credit measures going forward, which fall in line with the revised"aggressive" financial risk profile assessment. Through the first threequarters of the year (concurrent with the transformative acquisition in
December 2013), the adjusted EBITDA margin has risen to 28%, compared with 21%for full-year 2013. This has fueled a boost in EBITDA that we anticipate willlead to leverage leveling out just below 5x for the end of the year. For 2015,we are assuming that Murray will sell about 65 million tons of coal with a
nominal decrease in average prices and recent EBITDA margin gains fallingpartially, back to about 23%. We are also assuming $325 million in capitalspending.
The stable outlook reflects our expectation that Murray's production willincrease marginally in 2015 (the vast majority of production is already undercontracted commitments). We also anticipate sustained profitability nearcurrent levels, enabling the company to maintain its rating over the nextyear.
We would consider an upgrade if EBITDA margins are sustained consistentlyabove 25%, particularly if there is some reduction in debt. This would requiresteady operations, continued cost containment, and the absence of materialproduction outages.
We would consider a lower rating if leverage remains above 5x or liquiditydeteriorates such that we no longer considered it to be strong. Increasingleverage is more likely in the short term and could occur as a result of adrop in EBITDA due to unanticipated mining conditions that could affect costs