Approximately $900 million of debt affected
Toronto, September 03, 2014 -- Moody's Investors Service upgraded Thompson Creek Metals Company Inc.'s Corporate Family Rating (CFR) to B3 from Caa1, probability of default rating to B3-PD from Caa1-PD, senior secured rating to Ba3 from B1, and senior unsecured ratings to Caa1 from Caa2. The company's speculative grade liquidity rating was affirmed at SGL-3. Thompson Creek's rating outlook is stable.
RATINGS RATIONALE
"The upgrade of Thompson Creek's CFR to B3 reflects a reduction in its risks following several months of positive performance and cash flow trends at its new Mt. Milligan copper-gold mine", said Darren Kirk, Moody's Vice President and Senior Credit Officer. "We have gained increased confidence that these trends will continue, offsetting an expected reduction in cash flows from its Molybdenum operations next year", added Kirk, noting that "the company's liquidity serves as an adequate buffer against ongoing execution risks".
Thompson Creek's B3 corporate family rating is driven by its significant financial leverage, execution risks associated with ramping up production at Mt. Milligan to design specifications and Moody's expectation that the company's molybdenum operations will be significantly curtailed in early 2015, leaving the company almost entirely dependent on cash flows from the Mt. Milligan mine to service its nearly $1 billion in adjusted debt. The rating is supported by Thompson Creek's low political risks, Mt. Milligan's long life and low costs and the company's adequate liquidity.
The company's liquidity rating is adequate (SGL-3), with $216 million in cash at Q2/14 compared to about $35 million in debt maturities through 2015 and Moody's estimate that the company will generate about $40 million of free cash flow in the second half of 2014 offset by a similar amount of free cash flow consumption in 2015 associated with potentially higher capital expenditures and costs associated with the wind down of its Thompson Creek molybdenum mine. Thompson Creek does not have a committed revolving credit facility and has limited flexibility to sell assets to augment its liquidity. Debt maturities however remain relatively light until December 2017, when its US$350 million secured notes mature.
The stable outlook reflects Moody's expectation that Mt. Milligan will steadily ramp up towards design specifications by the end of 2015, supporting adjusted financial leverage around 6x and adequate liquidity.
The company's ratings could be upgraded if Mt. Milligan continues to ramp up as expected and Moody's expects Thompson Creek will maintain adjusted Debt/EBITDA below 4.5x.
The company's ratings could be downgraded if Mt. Milligan experiences operational challenges such that the company appears likely to sustain adjusted Debt/EBITDA above 6.5x. The ratings could also be downgraded if the company fails to maintain adequate liquidity.
Rating Upgrade:
Corporate Family Rating, to B3 from Caa1
Probability of Default Rating, to B3-PD from Caa1-PD
Multiple Seniority Shelf, to (P)Caa1 from (P)Caa2
$350 million senior secured notes due 2017, to Ba3 (LGD2) from B1 (LGD2)
$350 million senior unsecured notes due 2018, to Caa1(LGD5) from Caa2 (LGD5)
$200 million senior unsecured notes due 2019, to Caa1(LGD5) from Caa2 (LGD5)
$2 million debt component of tangible common equity units, to Caa1 (hyb) (LGD5) from Caa2 (hyb) (LGD5)
Ratings Affirmed:
Speculative Grade Liquidity Rating, SGL-3
Outlook:
Remains Stable
Thompson Creek Metals Company Inc., owns and operates Mount Milligan, a copper-gold mine in Northern British Columbia, as well as two open pit molybdenum mines and related processing centers in the United States and Canada. Annual revenues through June 30, 2014 totaled $617 million. Thompson Creek is headquartered in British Columbia, Canada with executive offices in Littleton, Colorado.
The principal methodology used in this rating was the Global Mining Industry published in August 2014. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Darren M. Kirk
VP - Senior Credit Officer
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635
Donald S Carter
MD - Corporate Finance
Corporate Finance Group
(416) 214-1635
Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635