S&P ups Foundation Coal outlook to positive

Standard & Poor's said it revised its outlook on Foundation Coal Corp. to positive from stable and affirmed the company's BB- corporate credit rating, B senior unsecured debt rating and the BB- bank loan rating on its $685 million secured credit facility. The recovery rating on the facility was raised to 2 from 4.

S&P said the outlook revision reflects the company's improved operating and financial performance and the agency's belief that strong coal markets and Foundation's expansion efforts will offset cost pressures and potential increases in debt.

The upgrade of the recovery rating on Foundation's senior secured bank loan facility reflects improved recovery prospects because of voluntary prepayments of the term loan by the company, the agency said. Since the end of 2004, Foundation has reduced its term loan by $135 million, to $335 million, mostly through its excess free cash flows.

S&P said the ratings reflect the company's aggressive financial leverage of 3.5x, production concentration and inherent operating risks, partially offset by its competitive cost position and favorable coal industry conditions.

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