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Related Issuers
Rating Action:

Moody's downgrades Eldorado's ratings to B2; outlook is negative

05 Apr 2018

Toronto, April 05, 2018 -- Moody's Investors Service, ("Moody's") downgraded Eldorado Gold Corporation's (Eldorado) Corporate Family rating (CFR) to B2 from B1, Probability of Default Rating to B2-PD from B1-PD and senior unsecured note ratings to B2 from B1. Eldorado's Speculative Grade Liquidity Rating ("SGL") is affirmed at SGL-2. The rating outlook is negative.

"The downgrade of Eldorado's rating reflects the high execution risk with its projects, particularly at Kisladag and in Greece, combined with continued cash consumption driven by spending on projects", said Jamie Koutsoukis, Moody's Vice-President, Senior Analyst.

Downgrades:

..Issuer: Eldorado Gold Corporation

.... Probability of Default Rating, Downgraded to B2-PD from B1-PD

.... Corporate Family Rating, Downgraded to B2 from B1

....Senior Unsecured Regular Bond/Debenture, Downgraded to B2(LGD4) from B1(LGD4)

Outlook Actions:

..Issuer: Eldorado Gold Corporation

....Outlook, Remains Negative

Affirmations:

..Issuer: Eldorado Gold Corporation

.... Speculative Grade Liquidity Rating, Affirmed SGL-2

RATINGS RATIONALE

Eldorado's B2 corporate family rating is driven by its modest scale, exposure to the volatile price of gold, relatively high geopolitical risks, limited mine diversity, and execution risks related to its material development projects. Eldorado has multiple projects on its plate, with plans to spend $1 billion in capex over the next 3 years. It will build a mill at Kisladag to account for lower expected gold recoveries from heap leaching, construct its Lamaque mine in Canada and build its Skouries mine in Greece (Skouries will not proceed until all permits have been issued). However because its production is concentrated in just a few mines, development plans have an significant impact on the company's credit. Also we expect Eldorado will generate lower cash flow from operations as production will be affected by Kisladag's underperformance and projects will take longer to develop, resulting in elevated leverage above 4x through 2019.

Eldorado however, has an average cost position, and a material cash balance which will allow it to fund its cash consumption driven by its project spending without increasing debt in 2018 and likely 2019. We however see longer term refinancing risk should Eldorado encounter difficulties or delays in bringing new developments online as both its revolver and bonds mature in 2020, the same time as its projects are expected to increase production.

Eldorado has good liquidity (SGL-2), with a cash balance of $480 million at December 2017, and an undrawn $250 million revolving credit facility which matures in June 2020. The large cash balance will allow Eldorado to fund Moody's estimated free cash flow consumption of about $175 million in 2018, as the company continues to spend on developing its new mines. Eldorado's credit facility financial covenants include a maximum net debt to EBITDA of 3.5x and a minimum EBITDA to interest of 3x, and Moody's expects the company will maintain covenant headroom. The company does not have any material debt maturities until 2020 when its credit facility (June 2020) and $600 million unsecured notes (Dec 2020) become due.

The negative outlook reflects the execution risk Eldorado continues to face to bring its projects to production, as well the risk the company could exhaust its available liquidity because of its significant capital program.

Upward rating movement is unlikely in the mid-term but could occur over time if Eldorado is able to achieve commercial production at some of its key development projects, reducing its mine development execution risk, accompanied by adjusted leverage sustained below 3.5x (5.3x at Q4/17) and it maintains adequate liquidity.

Downward rating movement could occur should liquidity weaken materially or if uncertainty increases over the ability of Eldorado to complete its development projects and produce cash flow. A ratings downgrade would also result should adjusted leverage exceed 5x for a sustained period (5.3x at Q4/17).

Headquartered in Vancouver, Canada, Eldorado Gold Corporation owns and operates two gold mines in Turkey, and a gold mine and lead/zinc/silver mine in Greece. The company also has plans to develop the Skouries gold mine in Greece and Lamaque mine in Canada. Revenues were $390 million in 2017.

The principal methodology used in these ratings was Mining Industry published in April 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jamie Koutsoukis
Vice President - Senior Analyst
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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​

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