ASIAN COAL PRODUCERS HAVE INCREASED DEFAULT RISK, MOODY’S SAYS

Winsway Coking Coal Holdings Ltd. (1733) and Hidili Industry International Development Ltd. (1393) are among Asian coal producers at an increased risk of default on the outlook for prices, Moody’s Investors Service Inc. said.

Weak coal prices will “pressure the credit quality and liquidity of most coal producers in the Asia Pacific region in the next 12 to 18 months,” Simon Wong, a vice president at Moody’s, said in a report today. The rating services company is “particularly concerned” about Winsway, a Chinese coking coal importer, which has a liquidity buffer of less than three months, Wong said.

Global coal supply will continue to outpace demand as low-cost producers are likely to increase output to maximize cash flow, Moody’s said. Rising exports from the world’s biggest producers have created a coal surplus of as much as 20 million metric tons, or about 2.5 percent of global trade last year, according to UBS AG.

“The market conditions are a reality,” Laura Shi, an investor relations director at Winsway, said from Beijing, adding the company is taking measures to improve its cash position. An e-mail seeking comment from Hidili’s investor relations department wasn’t immediately answered.

PT Bumi Resources (BUMI) and Mongolian Mining Corp. (975) also face significant credit risks over the next 12 months, Moody’s Wong said. Mongolian Mining’s Chief Executive Officer Battsengel Gotov told reporters last month the company is talking to lenders to extend debt maturities.

Price Estimate

Moody’s lowered its 2013 price estimate for Newcastle thermal coal to $80 to $85 a ton, and Queensland hard coking coal, used to make steel, to $150 a ton.

Newcastle thermal coal has dropped 15 percent this year to $78.25 a ton on Sept. 20, the most recent data available. Queensland coking coal is down 7.3 percent to $150.25 a ton on Sept. 13, data from Energy Publishing Inc. and compiled by Bloomberg show.

Winsway, which imports coking coal from Mongolia to China, is buying back as much as $460.5 million of debt at less than a third of its original value, according to a statement to the Hong Kong stock exchange last month. The buyback offer “is expected to provide a better recovery rate for the holders than in liquidation,” Winsway said in a document to bondholders obtained by Bloomberg News.

The company’s noteholders have so far tendered about 36 percent of outstanding bonds, Winsway said in a Sept. 9 statement. The offer was extended to Sept. 23, New York time, according to the statement.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

Comments

Popular posts from this blog