Fitch cuts Yanzhou Coal, notes

Fitch Ratings said it downgraded Yanzhou Coal Mining Co. Ltd.’s long-term issuer default rating to BB- from BB+.

The outlook is negative.

Simultaneously, the agency lowered the rating on the $1 billion dual-tranche notes issued by Yancoal International Resources Development Co., Ltd. and guaranteed by Yanzhou Coal to BB- from BB+, and the ratings on the dollar-denominated senior perpetual capital securities issued by Yancoal International Trading Co., Ltd. and guaranteed by Yanzhou Coal to B+ from BB.

Fitch said the downgrades and negative outlook reflect the substantial deterioration of the company's cash generation capacity and credit metrics. Coal prices have continued to fall despite some production cuts across the industry. Fitch expects China coal prices to remain subdued for an extended period.

In addition, further room for cost savings by Yanzhou Coal is fairly limited while its capital expenditure will remain elevated in the next two years, which will constrain its capability to deleverage.

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