Moody’s lowers Berau Coal to B2

Moody's Investors Service said it downgraded the corporate family rating of Berau Coal Energy Tbk.’s (BCE) to B2 from B1 as well as the senior secured ratings on the bonds issued by Berau Coal and Berau Capital Resources Pte Ltd., which are guaranteed by Berau Coal.

The outlooks remain negative.

At the same time, the agency withdrew the provisional B1 rating assigned to Berau Capital Resources II Pte. Ltd.'s proposed senior secured notes on July 25, as the issuance has been postponed. Berau Coal announced on Aug. 12 that the company decided not to proceed with the proposed bond transaction due to adverse market conditions. The company intends to proceed with the refinancing plans when market conditions permit.

"The downgrade of BCE's ratings to B2 was driven by a combination of the sustained decline in thermal coal prices, resulting in the weakening of earnings and cash flows, and the increasing refinancing risk with its $450 million senior secured notes maturing in less than 12 months," Moody's vice president and senior analyst Brian Grieser said in a news release.

"The decision to postpone its proposed offering reduces Berau's much-needed financial flexibility and exposes the company to ongoing market risk during a period of prolonged operating weakness and significant transition at both the management and board levels."

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