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Investing.com -- Fitch Ratings has downgraded the Long-Term Issuer Default Rating (IDR) of Coronado Global Resources Inc. (CRN) to 'B' from 'B+', with a Negative outlook. The US dollar senior secured notes issued by CRN's wholly owned subsidiary, Coronado Finance Pty Ltd, have been affirmed at 'BB-' with a Recovery Rating (RR) of 'RR2'. These notes are guaranteed by CRN and all its operating subsidiaries.
The downgrade and negative outlook are due to significant risk to CRN's financial metrics and credit profile, following a sharp fall in metallurgical (met) coal prices since February 2025. The outlook also reflects risks to coal demand recovery, particularly in light of recent US tariff increases. Growth prospects in Asia have deteriorated as a result, contradicting Fitch's Global Economic Outlook in March 2025.
CRN's liquidity could be impaired if it fails to secure additional funding, with the weak price environment potentially hampering its efforts. The company may consider cutting operating costs and capital expenditure through cost reduction and deferral initiatives, but these steps could have repercussions beyond 2025.
Despite these challenges, Fitch expects an improvement in CRN's business profile due to a significantly better global cost position starting in the second half of 2025 and a substantial improvement in the financial profile from 2026.
Fitch estimates that CRN will incur an EBITDA loss in 2025, following a weak Fitch-adjusted EBITDA of $72 million in 2024. This forecast loss is driven by weak met prices, despite an expected significant improvement in unit production costs. Fitch predicts a large negative free cash flow (FCF) of over $350 million for CRN in 2025, which would drain its end-2024 cash of around $340 million in the absence of additional funding.
Fitch expects CRN to obtain more debt in the next few months to support its liquidity. They also anticipate the company will engage lenders of its asset-based revolving credit facility (RCF) to provide covenant flexibility, allowing CRN to draw around $130 million.
Premium hard met coal prices for Australia have fallen swiftly to below $170 per tonne, from $190 per tonne in mid-February 2025, due to sustained weakness in demand from the steel sector. Risks to a meaningful price recovery in the near term are substantial, on weak prospects for global growth and steel demand due to US tariff hikes outlined on April 2, 2025.
Fitch rates CRN based on its standalone credit profile, despite Coronado Group LLC's 50.4% stake. They see limited risk to CRN's credit profile from large dividends or other forms of exceptional returns to Coronado Group and EMG. CRN is listed in Australia and has a majority of independent board directors.
The ratings of CRN 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).
Fitch's key assumptions for CRN include total coal sales volume, including thermal coal, of 18 mt in 2025 and 19 mt from 2026, average realised price for coal sales of around $120/t over 2025-27, and unit cost of coal revenues declines by $20/t in 2025 and further by around $10/t in 2026.
Factors that could lead to a negative rating action or downgrade include a deterioration in liquidity, potentially due to an inability to obtain additional financing, and Fitch's expectations for EBITDA net leverage above 3.5x for a sustained period and EBITDA interest coverage below 2.5x for a sustained period. Fitch may revise the Outlook to Stable if performance is better than the sensitivities for negative rating action.
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