Mineweb reported that yesterday, Moody’s Investors Service downgraded Molycorp Inc.’s (NYSE:MCP) corporate family rating (CFR) from Caa1 to Caa2. The firm cited “continued weakness in rare earths pricing environment, ongoing negative free cash flows, weak liquidity and high leverage” as its reason for doing so.
As quoted in the market news:
‘Although Molycorp has now completed the construction of its Mountain Pass production facility and faces significantly lower capex requirements going forward, the project’s cost overruns left the company with absolute debt levels that may be unsustainable in a current price environment,’ said Moody’s Vice President and Senior Analyst, Anna Zubets-Anderson and Managing Director for Corporate Finance Brian B. Oak.
Molycorp’s total debt as of March 31, 2014, was US$1.14 billion with interest expense for the preceding 12 months at $140 million. At the same time, the company’s EBITDA and operating cash flows ‘were substantially negative’ for the same 12 months ended March 31, 2014, amounting to negative $140 million and $210 million respectively.