S&P Global Ratings downgraded Foresight Energy LP to CCC- from CCC+, and placed all of its ratings on CreditWatch with negative implications.
The downgrade was prompted by the U.S.-based coal producer's recent decision to use a 30-day grace period to defer the $24.4 million interest payment on their 11.50% second-lien senior secured notes due 2023.
If the company fails to pay the interest in the next 30 to 90 days, a default will occur under the second-lien term loan indenture and under the first-lien term loan and revolving credit facility. Foresight has $825 million of first-lien debt due in 2022 and $425 million second-lien debt due in 2023.
Ratings said it expects Foresight to have enough liquidity to pay the $24.4 million interest in the next 30 days but possibly not enough to make the next interest payment under the first-lien term loan, considering persistently low international coal prices and lower domestic thermal coal demand.
"In addition, the deep discount on [Foresight]'s secured debt prices and waning capital markets access will likely lead to restructuring in the next 90 days. We now think that the business risk of the company is vulnerable because of these risks," Ratings said in an Oct. 2 research note.
The CreditWatch negative placement reflects the possibility of Ratings downgrading Foresight within the next 30 to 90 days, depending on the status of the interest payment or in the event of an announcement of a restructuring plan.
Ratings also lowered the issue-level ratings on the company's first-lien debt to CCC from B-, and on the second-lien debt to C from CCC-.
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.
