Alpha Metallurgical upgraded by S&P Global Ratings to B- on higher coal prices

Alpha Metallurgical Resources Inc. was upgraded today by S&P Global Ratings to B- from CCC+, and its outlook was revised to stable from negative, with the rating agency citing improved market conditions and repaid debt for the upgrade. The company's senior secured debt was raised to B- from CCC+ as well.

Ratings said Alpha "mitigated the risk of a liquidity shortfall" over the next year after extending its asset-based lending facility to 2024 and repaying around $80 million in term loan debt and other obligations.

Coal prices in 2021 and 2022 are "materially higher" than in 2020, Ratings said, noting the current premium grade met coal international spot market price of over $300 per ton, more than double the historical average. The rating agency projected that the higher coal prices will enable Alpha to generate positive free operating cash flow in 2021 and as much as $500 million in free operating cash flow in 2022, some of which could be used to repay outstanding debt.

Ratings estimated that leverage over the next 12-24 months will drop to under 3x and forecasts that Alpha's exit from thermal coal operations could both "reduce legacy obligations" and add to liquidity.

Alpha is a Bristol, Tenn.-based producer of metallurgical coal.