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S&P lowers Peabody to default
Standard & Poor’s said it lowered the corporate credit rating on Peabody Energy Corp. to D from CCC+.
The agency also said it lowered the ratings to D on the company’s debt facilities associated with the missed interest payments. The 10% second-lien notes due 2022 was previously rated CCC+ and the 6˝% unsecured notes due 2020 was lowered from CCC-.
This is based on a view that the interest payments will not be made within the 30-day grace period, S&P said.
The agency also said it revised the recovery rating on the second-lien debt to 6 from 4. The 6 recovery rating indicates 0 to 10% expected default recovery.
S&P also said it revised the recovery rating on Peabody’s first-lien debt to 3 from 1. The 3 recovery rating indicates 50% to 70% expected default recovery.
The agency also said it lowered the rating on the debt to CC from B, along with the issue-level ratings associated with the company’s unsecured debt to C from CCC-.
The recovery rating on the debt remains at 6, indicating 0 to 10% expected default recovery.
S&P also said it lowered the rating on the company’s junior subordinated debt to C from CC.
The enormous stress on Peabody’s business and financial position will not ease anytime soon, S&P said.
The situation will eventually evolve into a general default, the agency said, and Peabody may choose not to pay all or substantially all of its obligations as they come due.
While the company’s debt-exchange efforts and additional asset-sales would enhance liquidity, S&P said it believes the business would likely remain unsustainable absent a comprehensive restructuring or a marked improvement in coal supply and demand dynamics.
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