Moody's turns Teck outlook to stable

Moody's Investors Service said it changed Teck Resources Ltd.'s outlook to stable from positive and affirmed the senior unsecured rating at Baa3.

On Tuesday, Teck reported a planned reorganization of its business to break up into two independent, publicly listed companies: Teck Metals Corp. and Elk Valley Resources.

“The spinoff of the metallurgical coal assets weakens the credit profile of Teck Metals relative to the predecessor company because of the loss of product diversity (on an owned asset basis), and elevated concentration to QB2.

“Teck Metals will retain exposure to the EVR assets through an 87.5% interest in a gross revenue royalty and preferred shares of EVR (collectively, the transition capital structure or TCS) whereby Teck Metals will receive quarterly payments consisting of royalty payments and preferred share redemption amounts that will in aggregate equal 90% of EVR free cash flow,” Moody’s said in a press release. Teck Metals will not be able to influence investment and capital spending decisions.

If the shareholders approve, the agency said it expects the spinoff to be completed in the second quarter of 2023.

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