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S&P cites Murray Energy's 'vulnerable' standing with new corporate rating


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S&P cites Murray Energy's 'vulnerable' standing with new corporate rating

Citinguncertainty about the company's "vulnerable" standing, Standard &Poor's Ratings Services gave MurrayEnergy Corp. a corporate credit rating of CCC+, up from its previousSD, or "selective default," rating.

In anApril 27 research note, S&P stated that the rating "reflects our view thatMurray is currently vulnerable and is dependent upon favorable business, financial,and economic conditions to meet its financial commitments."

The ratingagency cited the company'srecent purchase of over $480 million in debt principal since the third quarter oflast year that it views as distressed.

"Ourassessment is based on the uncertainty around operating cash flow given the difficultmarket environment and shifting competitive landscape, as well as liquidity pressuresassociated with the possibility of limited revolving credit availability due tocovenant limitations and continued debt purchases," the agency wrote.

Despitethe ratings increase, S&P stated that its outlook remains negative due to challengesto the company's liquidity, which it says will be under pressure for the next 12months.

"Wecould lower the rating if Murray's liquidity deteriorates to a level we considerto be weak," the agency wrote. "This could happen if the company breachesits financial covenants and loses access to its revolving credit facility or itsdebt obligations are accelerated. We could also lower the rating if the company'sinterest coverage is sustained below 1x. This could happen if weakening demand forsteam coal results in declines in production volumes or prices, eroding sales andprofitability."

Accordingto S&P, Murray is expected to sell about 48 million tons of coal this year,generating about $2.4billion in revenues and $660 million of adjusted EBITDA, which includes operatinglease and post-retirement expense adjustments.

One wayMurray could see an increased rating in the coming months is if it restores liquidityto a level S&P finds "adequate."

"Thiscould happen as a result of maintaining 15% covenant cushions either through a creditagreement amendment or debt reduction in conjunction sufficient sources of liquidity,"the agency wrote.

GaryBroadbent, spokesman for Murray Energy, responded to the ratings decision by tellingS&P Global Market Intelligence that the company has "great respect"for the rating agency and remains optimistic about the near future.

"Weremain confident that, as the low cost coal producer in every sourcing region inwhich we operate, Murray Energy is well positioned to face the challenges in thecurrent coal marketplace," Broadbent said.

S&P Ratings and S&P GlobalMarket Intelligence are owned by S&P Global Inc.