Fitch downgrades Emeco

Fitch Ratings said it downgraded Emeco Holdings Ltd.'s long-term issuer default rating to RD (restricted default) from C on news that the company completed the restructure of its $283 million 9 7/8% senior unsecured notes due 2019.

The notes were issued by Emeco Pty Ltd. and guaranteed by Emeco.

The transaction is considered a distressed-debt exchange, Fitch said.

The issuer default rating of the company was then upgraded to CCC, reflecting a belief that while the distressed exchange improves liquidity by extending the next maturity to 2022, business prospects are weak, the agency explained.

Emeco announced March 31 that it completed its debt restructure, as well as a merger with two local entities with similar businesses – Orionstone Holdings Pty Ltd. and Andy's Earthmovers Pty Ltd. – and has launched a A$20 million rights issue underwritten by its key shareholders and noteholders, Fitch said.

The agency said it expects Emeco to post EBITDA of about A$65 million in the financial year ending June 2017, which consists of nine months of Emeco's standalone operations and three months of operations post-restructuring.

The company's EBITDA also is expected to be pressured by the slow recovery in global commodity prices, Fitch noted.

Emeco's ratings reflect ongoing challenges in the global mining industry, which will continue pressuring Emeco's cash flow over the medium-term, the agency said.

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