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Announcement:

Moody's Disclosures on Credit Ratings of Alpha Natural Resources, Inc.

Global Credit Research - 13 Mar 2012

New York, March 13, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on Alpha Natural Resources and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for Alpha. Moody's current ratings for Alpha Natural Resources are:

Long Term Corporate Family Ratings domestic currency rating of Ba2

Probability of Default rating of Ba2

Senior Unsecured (domestic currency) domestic currency rating of Ba3, 68 - LGD4

Senior Unsec. Shelf (domestic currency) domestic currency rating of (P)Ba3

Speculative Grade Liquidity Rating rating of SGL-1

RATINGS RATIONALE

Alpha's Ba2 corporate family rating reflects its position as one of the top three U.S. coal companies in terms of production and reserves, its operating diversity with approximately 150 coal mines and a presence in Appalachia and the Powder River Basin (PRB), its ability to export coal though several East Coast and Gulf terminals, blending opportunities and synergies that arise from the Massey merger, and its 5 billion tons of reserves. The rating also reflects its very strong liquidity position, including $586 million of cash and cash equivalents, and availability of $1.1 billion under the revolver and AR securitization facilities.

Challenges for the Ba2 CFR include high business concentration in Central Appalachia, where the industry is facing a secular decline and challenging market conditions, including difficult geology, increasing costs, heightened MSHA scrutiny of mine safety, ongoing coal-to-gas substitution, and expected coal plant retirements due to aging fleet and tightening environmental standards. The ratings are also constrained by inherent volatility of met coal prices and current weakness in the seaborne met coal market, as well as the inherent geological and operating risks associated with mining.

Rating Outlook

The negative outlook reflects weakening operating performance due to the headwinds facing the US coal industry, and in particular the Central Appalachian region, including increasing costs due to difficult geology and regulatory pressures; weak international demand for metallurgical coal due to the ongoing financial crisis in Europe, slowing growth in steel production rates in China and additional supplies coming online globally; and weak domestic demand for steam coal due to ongoing coal to gas substitution, warm weather and environmental regulations that disadvantage coal.

What Could Change the Rating - Up

An upgrade is unlikely over the next 12-18 months but the outlook could be stabilized if operating performance improves and Debt/EBITDA is considered sustainable below 3.0x, free cash flow to debt is above 5%, and EBIT/ Interest is sustainable above 1.5x.

What Could Change the Rating - Down

Factors that could lead to a downgrade include a deterioration of prices, further cost increases, and permitting, regulatory, or litigation matters that impact output and costs. An increase in leverage above 3x EBITDA on a sustained basis, persistent free cash flow to debt below 5%, sustained EBIT to interest below 1.5x, or an erosion of liquidity would be signs pointing to a possible downgrade.

The principal methodology used in rating Alpha Natural Resources, Inc. was the Global Mining Industry Methodology published in May 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Anna Zubets-Anderson
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Disclosures on Credit Ratings of Alpha Natural Resources, Inc.
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


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