These guys are hopeless. It’s only months since they lowered their iron ore ratings benchmark to $75 and now it takes an equity suspension for them to wake up to junior downgrades.
From S&P:
Standard & Poor’s Ratings Services said today that it had lowered its corporate credit rating on Australian iron ore miner Atlas Iron Ltd. and the company’s senior secured debt to ‘CCC’ from ‘B-‘. At the same time, we placed all ratings on CreditWatch with negative implications. The recovery rating on the senior secured debt remains at the lower end of ‘3’. “The downgrade reflects our concerns that the recent rapid fall in iron ore prices could significantly weaken Atlas Iron’s liquidity position,” Standard & Poor’s credit analyst May Zhong said. “We expect the company to generate losses and negative free operating cash flows in the current quarter ended March 31, 2015.”
And Moody’s:
Moody‘s Investors Service today downgraded Atlas Iron Limited’s Corporate Family Rating (CFR) and senior secured ratings to Caa3 from Caa1. The ratings are on review for further downgrade.
“At current iron ore prices, which have plummeted to less than $50/ton in recent weeks (based on 62 Fe content), we believe that the company is generating negative operating cash flow which will likely use up its cash-on-hand over the next few quarters”, says Ranasinghe, adding “the cost rationalization initiatives taken by the company will help alleviate the liquidity challenges, but we do not believe they are sufficient to offset the negative impact of the currently very weak price environment”.
Well, no shit.
