Moody's downgrades outlook for MMC
“The negative outlook reflects the breach of financial covenants by MMC on its bank loans, as well as its weakened profitability and rising leverage,” said Simon Wong, vice president and senior analyst at Moody's.
Although the company has received waivers from its lenders, Moody's expects it will need to seek further waivers for its financial year-end results. MMC's operating results for the first half of 2012 were weaker than expected because of poor sales volume and operating margins. In addition, coking coal prices, which have declined over 20 percent since the end of July, are likely to remain soft in the near term. The rising proportion of middling output will also add pressure on MMC's average selling prices and margins.
“However, MMC's ratings continue to be supported by its lower-than-average cost base for production. Moody's also expects the company to remain flexible on the timing of the construction of its railroad, should coking coal prices remain weak,” said Wong, also Moody's lead analyst for MMC. Downward rating pressure could come from the deterioration of industry fundamentals, delays or the inability to secure covenant-breach waivers, or the beginning of railroad construction when coking coal prices are soft, or any changes to laws or regulations to adversely affect MMC's business.
SOURCE OF THIS ARTICLE : Business Council of Mongolia
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