Moody’s downgrades Peabody

Moody’s Investors Service said it downgraded the ratings of Peabody Energy Corp., including its corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD, ratings on senior secured credit facility to B1 from Ba3, ratings on second-lien debt to B3 from B2, ratings on senior unsecured notes to Caa1 from B3 and the rating on its junior subordinated debenture to Caa2 from Caa1.

Moody’s also changed the company’s speculative grade liquidity rating to SGL-3 from SGL-2.

The outlook is negative.

The downgrades reflect an expectation of continued deterioration in the company’s credit metrics, more precipitous than forecasted previously, due to the ongoing decline in the seaborne metallurgical coal markets, Moody’s said.

The company’s debt-to-EBITDA, as adjusted, will approach 9x in 2015, the agency said.

Although some recovery is anticipated in 2016, Moody’s said it expects the leverage to remain elevated at about 7x, Moody’s said.

The ratings also reflect pressures on the company’s U.S. thermal coal business from increased regulatory pressure and low natural gas prices, the agency said.

The ratings also consider its significant size and scale, broadly diversified reserves and production base, efficient surface mining operations and solid portfolio of long-term coal supply agreements with electric utilities, Moody’s said.

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