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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (31343)	1/18/2009 11:23:07 AM
From: LoneClone	Read Replies (1) \| Respond to of 195792

S&P gives Teck lowest investment grade rating, citing heavy debt load Standard & Poor's has urged Teck to pay US$6 billion of debt by 2010 to improve the Vancouver-based miner's low credit rating. Author: Dorothy Kosich Posted: Friday , 16 Jan 2009 RENO, NV - mineweb.net Standard & Poor's has downgraded Canadian miner Teck from ‘BBB' to ‘BBB-‘, which is the credit ratings agency's lowest investment grade rating. The outlook for Teck is negative. "The downgrade is based on our view that lower commodity prices and output will likely result in weaker profit expectations, higher leverage, and heightened refinancing risks for Teck in 2009," S&P Primary Credit Analyst Donald Marleau said. S&P estimated that, under current market conditions, Teck's cash from operations would leave the company with a US$3.5 billion refinancing requirement, of which only US$800 million could be funded with its current revolving credit facility. Marleau said he expects Teck's profitability to drop sharply in the second half of this year, "pushing leverage up to about 3.25x for the full year, which we view as high for the rating considering the weak near-term outlook for metals prices." "The ratings on Teck reflect our view of the company's heavy debt load, which it incurred in October 2008 to acquire the 60% of Elk Valley Coal, refinancing risks in 2009 caused by a rapid decline in prices for its key cash flow drivers, notably copper, zinc, metallurgical coal, and lead. In addition to volatile profitability stemming from its exposure to cyclical base metals prices, Teck's credit profile is exposed to the elevated operating and political risk that characterizes the mining industry," he said. However, Marleau added, these credit risks are counterbalanced by a satisfactory business risk profile because Teck is a diversified metals and mining company with low cost, long-lived mines. "We expect that the company will continue generating good operating cash flow in the near term, even though prices for its key metals have dropped significantly after a long cyclical upswing." S&P advised that weaker market conditions this year, combined with more than Cdn$700 million of interest, will slow Teck's internal debt reduction, "although we believe the company has good prospects for further incremental deleveraging by selling non-core assets." However, Marleau cautioned, that the sale of any other key assets except for a portion of Elk Valley, "would be detrimental to the company's attractive asset profile." Standard & Poor's estimated that Teck will need US$2.5 billion to $3 billion of refinancing or a maturity extension on its US$5.8 billion acquisition facility. Marleau explained that the negative credit outlook "stems predominantly from our view that Teck faces heavy refinancing risk in 2009, as well as the risk that leverage could remain high for the rating in the next several years." "For Standard & Poor's to revise the outlook on Teck to stable at the ‘BBB-‘ rating, the company would have to reduce debt to a point that would push debt to EBITDA to below 3x on a sustained basis, which we believe means reducing debt to US$6 billion by year-end 2010," Marleau concluded.