Moody's lowers Massey Energy, gives notes B1

Moody's Investors Service said it lowered Massey Energy Co.'s corporate family rating to B1 from Ba3, lowered the ratings on all of Massey's existing rated debt by one notch and assigned a B1 rating to the company's proposed $725 million note issue.

The downgrade was prompted by Massey's inability to increase production to the targeted level of 45 to 47 million tons, which is necessary to cover the company's high fixed cost base and generate consistent operating earnings.

Affected ratings include the company's $335 million of 6.625% guaranteed senior unsecured notes due November 15, 2010 to B1 from Ba3, $175 million of 2.25% guaranteed senior unsecured convertible notes due April 1, 2024 to B1 from Ba3, $220 million of 6.95% guaranteed senior unsecured notes due March 1, 2007 to B2 from B1 and $132 million of 4.75% guaranteed senior unsecured convertible notes due May 15, 2023 to B2 from B1.

The agency said the B1 corporate family rating reflects Massey's 2.3 billion ton coal reserve and strong competitive position in the Central Appalachian coal region, its favorable customer relationships and contracted tonnage for 2005 and 2006.

However, the rating also reflects Massey's persistent incurrence of operating losses, excluding other income, over the past several years due both to geologic and operating difficulties, which have continued to impact the company's productivity targets, Moody's said.

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