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I AGREE
09 Aug 2017
Hong Kong, August 09, 2017 -- Moody's Investors Service has placed under review for upgrade, Yanzhou
Coal Mining Company Limited's B2 corporate family rating, as well
as the B2 backed senior unsecured rating on the bonds guaranteed by Yanzhou
Coal and issued by its subsidiary, Yancoal International Resources
Development Co., Limited.
The rating action follows the announcement on 1 August 2017 by Yancoal
Australia — a 78% subsidiary of Yanzhou Coal — of its
plan to raise approximately $2.5 billion in equity to fund
its acquisition of Australia-based, Coal & Allied Industries
Limited.
Yancoal Australia will launch a 23.6 for 1 pro-rata renounceable
entitlement offer to raise approximately $2.35 billion.
Yanzhou Coal has committed to take up $1.0 billion of its
share under the entitlement offer. The balance of the entitlement
offer of around $1.3 billion is underwritten by investors,
including Glencore Coal Pty Ltd. which will take up $300
million.
In addition, Yancoal Australia will raise $150 million in
new shares, $100 million of which are committed by Shandong
Taizhong Energy Co., Ltd, and $50 million of
which by General Nice Development Ltd.
RATINGS RATIONALE
"The review for upgrade of Yanzhou Coal's ratings reflects
our expectation that Yancoal Australia's financial profile and operations
will improve, upon the successful completion of the Coal & Allied
acquisition," says Gerwin Ho, a Moody's Vice President
and Senior Analyst, and also the International Lead Analyst for
Yanzhou Coal.
Coal & Allied owns majority interests in three of the 10 largest low-cost
mines in Australia. The mines produce high quality thermal coal
products which are of high demand among power generating companies in
Asia. The low cost and high level of demand result in these mines
showing profitable operations.
The successful acquisition of these mines by Yancoal Australia through
the equity issuance would increase Yancoal Australia's size and
turn its operations profitable from the current loss position.
Such an improvement in Yancoal Australia's profitability would in
turn facilitate debt deleveraging at Yanzhou Coal, because Yancoal
Australia will remain a 65%-owned subsidiary of Yanzhou
Coal, upon completion of the equity raising as currently planned,
and the conversion of Yanzhou Coal's subordinated capital notes
in Yancoal Australia into equity.
These developments could result in upward pressure on Yanzhou Coal's
B2 corporate family rating. The current rating includes a two-notch
uplift to reflect Moody's expectation of extraordinary financial
support from its parent, Yankuang Group Corporation Limited —
which is in turn wholly owned by the Shandong Provincial Government —
in cases of financial distress.
As part of its review, Moody's will focus on the following
six factors:
(1) Any change in the extraordinary financial support available to Yanzhou
Coal from the Yankuang Group;
(2) Any change in Yanzhou Coal's significant role in the coal industry
in Shandong Province;
(3) Yanzhou Coal's liquidity position and access to financing from
Chinese banks, in view of the material levels of short-term
debt that require refinancing;
(4) Yanzhou Coal's levels of capital expenditures and debt leverage
over the next two years;
(5) Yanzhou Coal's ability to raise $1 billion in equity
to fund its participation in Yancoal Australia's equity raising;
and
(6) Yankuang Group's ability to provide funding to Yanzhou Coal
in the event that the proceeds from the entitlement offer and the share
placement fall short of $2.5 billion.
The principal methodology used in these ratings was Global Mining Industry
published in August 2014. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
Yanzhou Coal Mining Company Limited listed on the Shanghai, Hong
Kong and New York stock exchanges in 1998. At end-2016,
it was 56.6%-owned by Yankuang Group Corporation
Limited, a state-owned enterprise that is in turn wholly
owned by the Shandong Provincial Government.
At 31 December 2016, Yanzhou Coal owned and operated 18 coal mines
across China and Australia, including in Shandong and Shanxi provinces
and the Inner Mongolia Autonomous Region in China, as well as in
the Australian states of Queensland, New South Wales and Western
Australia.
The Local Market analyst for these ratings is Cindy Yang, +86
(10) 6319-6570.
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.
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.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Gerwin Ho
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
No Related Data.
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