Moody's may downgrade Stillwater

Moody's Investors Service said it placed Stillwater Mining Co.'s B2 corporate family and probability-of-default ratings, B2 (LGD3, 44%) senior secured term loan and revolving credit facilities and Caa1 (LGD6, 93%) senior unsecured rating under review for possible downgrade.

The action follows the company's announcement that it will be offering a private placement of $165 million of convertible senior notes. Proceeds from the notes will likely be used to refinance Stillwater's existing $98.3 million term loan and to provide cash collateral for bonding currently secured by letters of credit drawn under the existing $40 million revolver.

The review stems from the agency's concerns regarding the company's higher overall pro forma leverage given ongoing operational and production challenges and Moody's concern regarding Stillwater's liquidity given the elimination of the revolver. While the company will have a cash balance of about $128 million, up to $40 million of cash may eventually be restricted to serve as collateral for the letters of credit.

Moody's said it is also concerned by the absence of a backup liquidity facility.

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