S&P Global Ratings downgraded its issuer credit rating on Murray Energy Corp. to "selective default" after the coal producer failed to make amortization and interest payments on a superpriority term loan due earlier this week.
Murray Energy also entered into forbearance agreements with the majority owners of the superpriority term loan due in 2022 as well as asset-based lending and first-in, last-out credit facilities due in 2021, according to an Oct. 4 update from the financial services company.
Ratings wrote that the "forbearance implies the investors will receive less value than the promise of the original securities" and lowered its rating from CCC to SD, or selective default. It also reduced its issue-level ratings on the coal miner's $1.6 billion B-2 and $158 million B-3 outstanding first-lien term loans due in 2022 from CCC to D.
Ratings maintained its D rating on the $295 million outstanding second-lien notes due in 2021 as well as the $479 million outstanding 1.5-lien senior notes due in 2024.
"In our view the forbearance constitutes a form of restructuring such that the participating investors will receive less value than the promise of the original securities," Ratings stated.
If Murray Energy fails to make its interest and principal payments on the superpriority term loan B-2 and B-3 within the five-business-day grace period, then the firm will revise its rating on the company to D. Ratings wrote that it would consider such move a "general default" for not paying substantially all of its obligations when they were due.
The firm will issue a D rating if Murray Energy announces a restructuring plan for its debt structure as well, since such a scenario would likely result in lenders receiving less value.
"In addition, we now think that the business risk of the company is vulnerable because of lower domestic demand and persistently low international thermal coal prices," according to Ratings.
The firm also recently downgraded Murray Energy-controlled Foresight Energy LP after the company deferred on an interest payment. An S&P Global Market Intelligence analysis found that operations controlled by Murray Energy mined about 11% of the coal in the U.S. in the first six months of the year.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.
