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S&P downgrades Westmoreland Coal to SD following $110M bridge financing

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S&P downgrades Westmoreland Coal to SD following $110M bridge financing

S&P Global Ratings lowered Westmoreland Coal Co.'s credit rating to SD from CCC-, citing the company's $110 million bridge loan financing that subordinates the first lien lenders' debt to the new loan.

The Colorado-based coal producer obtained the new financing commitment May 22 from an ad hoc group of its existing secured creditors holding roughly 79% of its term loan and senior secured notes. The term loan is secured by substantially all of Westmoreland's U.S. and Canadian assets and could be converted into a post-petition financing package if Westmoreland were to pursue an in-court restructuring.

"We consider the subordination of the secured creditors to the bridge financing a distressed transaction because it alters the ranking of the existing secured lenders to a junior position," S&P said in a May 29 research note.

The rating agency also lowered its issue-level rating on Westmoreland's first-lien term loan and 8.75% senior secured notes to D from CCC-, and removed its ratings on the company from CreditWatch with negative implications.

Concurrently, it maintained the rating on Oxford Mining Co. LLC's debt at CC and on CreditWatch with negative implications, saying that "a default of Westmoreland Resource Partners LP is a virtual certainty because the entity does not have enough liquidity to repay its term loan due Dec. 31." Oxford Mining is a subsidiary of Westmoreland Resource Partners.

As of March 31, the limited partnership has $312.4 million outstanding that could be accelerated and immediately due following the expiration of the covenant waiver on June 15, S&P said.

The company notified investors April 2 that it may seek Chapter 11 bankruptcy protection or be subject to an involuntary petition for bankruptcy, and said its auditors have expressed "substantial doubt" about the company's ability to continue as a going concern.

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 Inc. 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 brief can be found here.