Moody’s Says Met Coal Prices Need to Improve For Teck to Maintain Baa3 Rating

Mining Weekly reported that Moody’s has said Teck Resources’s (TSX:TCK.B) Baa3 credit rating could be in danger if metallurgical coal prices fail to recover.

As quoted in the publication:

Vancouver-based Teck’s adjusted leverage was expected to remain above 3x through 2016, even if met coal prices rose to $120/t, as expected.

“This leverage is high for the company’s rating, but acceptable in context of a cyclical downturn,” Moody’s analysts said in a report released Monday.

“Despite our expectation for improvement, spot met coal prices have continued to fall in recent weeks to about $85/t. Teck’s proforma adjusted leverage would approach 4.75x in 2016 if current spot prices persist, which would jeopardise its rating.”

Baa3 was the lowest investment grade rating of Moody’s long-term corporate obligation ratings. Obligations rated Baa3 were subject to moderate credit risk, considered medium grade and, as such, might possess certain speculative characteristics. The rating one notch higher was A3 and one notch lower was Ba1.

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