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Investing.com -- Fitch Ratings has lowered its rating for Coronado Global Resources Inc.’s (CRN) Long-Term Issuer Default Rating (IDR) to ’CCC+’ from ’B’. The downgrade also impacts the rating on the US dollar senior secured notes issued by CRN’s wholly owned subsidiary, Coronado Finance Pty Ltd, which has been downgraded to ’B’ from ’BB-’, with a Recovery Rating (RR) of ’RR2’.
The reason for the downgrade is CRN’s limited liquidity, as Fitch anticipates the cash depletion seen in the first quarter of 2025 to worsen without additional funding. The company’s attempts to negotiate changes to its asset-based revolving credit facility (RCF) have been delayed, alongside plans to secure more financing. The geopolitical uncertainty around US tariffs and their impact on prices of metallurgical (met) coal, CRN’s main output, and interest rates has increased risks.
CRN’s cash balance fell by 32% in the first quarter of 2025 to $229 million, due to lower coal sales volume and a quarter-on-quarter increase in mining cost per tonne sold. The company’s sales volume fell by 8% year-on-year and 17% quarter-on-quarter, which the company attributed in part to external factors that delayed shipments. CRN expects its sales volume to recover from the second quarter of 2025.
Fitch forecasts a negative free cash flow of over $400 million in 2025, which would deplete cash without additional funding. The company is also seeking other financing that would exempt it from the minimum fixed-charge cover incurrence covenant of 2.0x under the notes. However, obtaining additional funding in a timely manner at a manageable cost could be challenging due to market volatility.
The company plans to optimize contractor structure and idle surface operations at Logan in the US to reduce operating costs. However, the company does not intend to take steps such as lowering strip ratios, which would weaken longer-term profitability.
CRN’s coal sales volumes are expected to increase by over 10% in 2025, on higher output at key assets. The company plans to increase the mining units at Mammoth to three, from one, by the second half of 2025. It also aims to add a raw coal storage facility and coal hoisting capacity at Buchanan in the second quarter of 2025.
Fitch rates CRN based on its standalone credit profile, despite Coronado Group LLC’s 50.4% stake. The company is listed in Australia and most of its directors are independent.
CRN’s ratings can be compared with other rated met coal producers Golden Energy and Resources Pte. Ltd. (GEAR, B+/Stable) and Mongolian Mining Corporation (MMC, B+/Stable). GEAR’s assets have a better cost position than CRN’s, within the third quartile of the global met coal cost curve. MMC has a significantly stronger financial profile than CRN.
Fitch’s key assumptions for its rating case for CRN include total coal sales volume, including thermal coal, of 18 million tons in 2025 and 19 million tons from 2026. It also assumes an average realized price for coal sales of around $120 per ton over 2025-2027 and a unit cost of coal revenues decline by $14 per ton each in 2025 and 2026.
The recovery analysis assumes that CRN would be liquidated in bankruptcy, based on Fitch’s estimate of higher recoveries for debtholders in case of liquidation compared with CRN’s going-concern enterprise value. Fitch assumes that the $150 million RCF will be fully drawn and practically rank ahead of the $400 million senior secured notes in the event of liquidation.
Factors that could lead to a further negative rating action include a deterioration in liquidity, potentially due to an inability to obtain additional financing. On the other hand, an improvement in CRN’s liquidity profile could lead to a positive rating action.
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