Following Contura Energy Inc.'s merger with Alpha Natural Resources Inc. to form the largest metallurgical coal producer in the U.S., S&P Global Ratings raised Contura's issuer credit rating to B from B-.

Contura refinanced its capital structure, which includes a new $550 million term loan facility that matures in November 2025 as well as a $225 million asset-backed revolving credit facility that matures in April 2022, according to a Dec. 19 research update from S&P Global Ratings.

S&P increased its issue-level ratings on Contura's senior secured debt from B to B+ with a recovery rating of 2 and gave Contura a stable outlook reflecting leverage expectations around 2x heading into 2020.

The improved credit measures also stem from the company's recent reductions in asset retirement obligations, which were slightly offset by S&P's expectations that coking coal prices will fall about 11% in 2019.

"With a reliable source for met coal in Alpha's reserves, Contura is positioned to take advantage of the robust met coal export market, while also benefiting from the diversification provided by its substantial thermal coal operations," S&P wrote.

S&P projects that Contura's metallurgical coal exports will account for less than 50% of the company's total coal production but will yield more than 60% of total 2019 sales.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news article can be found here.