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CreditWatch On Atlas Iron Ltd. Ratings Revised To Positive After Acquisition Progress By Hancock Prospecting Pty Ltd.

หน้าแรก > ข่าวธุรกิจ > CreditWatch On Atlas Iron Ltd. Ratings Revised To Positive After Acquisition Progress By Hancock Prospecting Pty Ltd.
ผู้โพส : Admin / วันที่โพส : 2018-10-11 14:16:36
คำค้นหา : Standard & Poor's Keyword: S&P S&P Global Ratings


CreditWatch On Atlas Iron Ltd. Ratings Revised To Positive After Acquisition Progress By Hancock Prospecting Pty Ltd.




          SYDNEY (S&P Global Ratings) Oct. 11, 2018--S&P Global Ratings said today that it has revised the CreditWatch implications to positive from developing, on the 'CCC' issuer credit rating and issue ratings on Atlas Iron Ltd. We initially placed the ratings on CreditWatch with developing implications on June 8, 2018. 
          Atlas Iron is an iron ore mining company based in Australia. 
          We placed the ratings on CreditWatch with positive implications because we consider the acquisition of Atlas Iron by Hancock Prospecting Pty Ltd. (not rated) is likely to be supportive of the subsidiary's business. In addition, we believe the parent entity's credit quality is potentially stronger than Atlas Iron's. In our opinion, the likelihood of downside rating momentum has reduced because Hancock Prospecting has indicated it will support all of Atlas Iron's ongoing obligations, including the A$86 million term loan B (TLB) facility. 
          The acquisition has the potential to be credit positive for Atlas Iron if (1) we consider Atlas Iron and its assets to be of strategic importance to Hancock Prospecting, and (2) we are able to provide an informed view of the credit quality of the wider group. 
          We believe the significant investment by Redstone Corp. Pty Ltd. (not rated) and Hancock Prospecting to date and the letter of comfort issued by Redstone indicate the new owners' willingness to support Atlas Iron, although no formal funding agreements have been agreed. The lenders have also waived any future default in connection with the unwinding of the Alliance Agreement arrangements between Atlas Iron and Mineral Resources Ltd.
          The rating action follows the off-market takeover bid by Redstone, a wholly owned subsidiary of Hancock Prospecting Pty Ltd., to acquire more than 90% (90.88% as of Oct. 10, 2018) of the outstanding shareholding of Atlas Iron on Oct. 9, 2018. Hancock Prospecting intends to initiate compulsory acquisition proceedings to acquire the remaining outstanding shareholders at an offer consideration of A$0.046 per Atlas Iron share. We note that a strategic review of Atlas Iron will begin once the offer is formally closed. We would seek to resolve the CreditWatch upon the completion and outcome of the strategic review by Hancock Prospecting.
          Atlas Iron's TLB facility had a change of control clause, whereby an event of default would occur if Redstone's voting power in Atlas Iron were to exceed 50%. This event would have given lenders under the TLB facility the option to accelerate repayment of the debt. The TLB lenders have not exercised this right and have since agreed to waive the change of control clause. The clause was replaced with a 60-day put option that commenced on Oct. 3, 2018. If the put option is exercised by a majority of lenders, Redstone or associates will have to purchase the full TLB debt at face value. 
          We consider Atlas Iron to have weak fundamental operations on a stand-alone basis. The company is likely to continue consuming its cash due to its high operating leverage and dependence on iron ore sales volume for profitability. 
          The 'CCC' rating on Atlas Iron reflects the company's weak liquidity position, small scale of operations globally (9.2 million tons of iron ore shipped as of June 30, 2018), and relatively high production costs. Its C1 cash costs (production costs before marketing and shipping costs) were A$39.30 per wet metric ton (wmt) and full cash costs were A$59/wmt during the year ended June 30, 2018. Atlas Iron faces asset concentration risk after its Abydos and Wodgina mines ceased production in 2017. The annual production rate at its Mt Webber project has decreased to 7 million tons per annum (mtpa) from 9 mtpa, due to challenging market conditions. 
          We would seek to resolve the CreditWatch upon the completion and outcome of the strategic review by Hancock Prospecting.
          In our view, the potential for a higher rating depends on our view of the credit quality of the acquiring group, and Atlas Iron's level of integration and strategic importance to the wider group.
 
 
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