Mongolian Mining’s Rating Cut by Moody’s on Debt Payment Concern

Mongolian Mining Corp. (975), which sells 42 percent of the nation’s coal to China, was downgraded by Moody’s Investors Service because of concern it may not be able to pay its debt.

The rating was cut by a level to Caa2, Moody’s said today in a statement, the fourth-lowest non-investment grade. The Ulaanbaatar-based company is negotiating waivers and relaxation of its bank covenants, Moody’s said.

Miners in Mongolia are under pressure as the nation’s coal exports dropped 20 percent in the first nine months of this year and as prices of the commodity declined. Mongolian Mining is seeking to reschedule loan repayments after it reported a first-half loss of $25.2 million, Chief Executive Officer Battsengel Gotov said in August.

“Its cash balance will be insufficient to address debt-servicing requirements” in the second half of 2013 and 2014, Moody’s said in the statement.

The company expects to increase cash and reduce debt-servicing requirements next year after a possible loan restructuring and sale of its paved road, Mongolian Mining Chief Financial Officer Ulemj Baskhuu said today in an e-mail reply to questions.

“The coking coal price weakness has impacted the company earnings and liquidity position,” Baskhuu said. “However, because of the successful cost cutting measures and improvements in operational efficiencies, we were able to mitigate this impact. With regards to the downgrade, I believe that agency opinion and timing is an independent view.”

MMC shares gained 3.1 percent to HK$1.35 at the close of trading in Hong Kong today, before Moody’s released its statement. The stock has slumped 64 percent this year, compared with a 4.6 percent gain in the key Hang Seng (2828) index.

“There are some other possible avenues for MMC to enhance its liquidity position in the next 12 months, such as a significant asset divestment, or equity injection, particularly after the relaxation of foreign investment laws in Mongolia,” Moody’s said. “However, these options may be limited by its low share price and weakened asset valuation.”

To contact the reporters on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net; Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.