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S&P lowers Westmoreland Coal's ratings on 'unsustainable' capital structure

S&P Global Ratings on March 29 lowered Westmoreland Coal Co.'s credit rating to CCC+ from B, saying the company's capital structure is "unsustainable" in the long term.

Concurrently, the issue-level rating on Oxford Mining Co. LLC's first-lien term loan was lowered to CCC+ from B, with a recovery rating affirmed at 3. Westmoreland's first-lien term loan and 8.75% senior secured notes were also lowered to CCC+ from B, with a recovery rating unchanged at 4.

"The downgrade reflects our view that the company could be unable to refinance 2018 maturities without a significant boost in coal prices and volumes over the next year," S&P wrote.

It further noted Oxford's $295 million term loan due in December 2018. "Although currently undrawn, Oxford's $15 million revolving credit facility and WCC's $50 million revolving credit facility revolving facility are due in December 2017 and 2018, respectively. As of December 2016, the company had approximately $1.1 billion of debt outstanding," it said.

S&P gave Westmoreland a negative outlook, as an indication of increased refinancing risk associated with the $295 million term loan due in December 2018, as well as the possibility of the company pursuing a distressed exchange or similar restructuring in the next 12 months.

Westmoreland announced in its March 28 earnings call that it is looking to limit cash drag and possibly sell some assets as a plan to phase out coal looms over some of its Canadian operations. The company reported a net loss of $7.6 million in the fourth quarter of 2016, but it posted a record quarterly adjusted EBITDA of $89.1 million.

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