According to Moody’s Investors Service, Winsway Coking Coal Holdings’ liquidity position is concerning after it completes its debt exchange that was proposed last month. According to a source from Moody’s, Winsway Coking Coal Holdings already has an inadequate liquidity buffer of less than three months for that matter.
In an announcement Moody’s Investors Service said that excess coal supplies and continued weak prices for coal over the next one and half year will cause a lot of financial stress on the least liquid coal producers in Asia Pacific which in consequence will increase their risk of default.
The release from the firm further said that Moody expects weak coal prices through 2014 to pressure the credit quality and liquidity of most coal producers in the Asia Pacific region in the next 12 to 18 months.
Winsway Coking Coal Holdings Limited is one of the leading suppliers of imported coking coal. In fact, it is one of the single largest offtaker of Mongolian coking coal into China in terms of volume purchased in 2009.
However, Moody admits that it is concerned about Winsway Coking Coal Holdings’ liquidity position after it completes its debt exchange that was proposed last month, given its already inadequate liquidity buffer of less than three months.
Moody’s Investors Service has also shown its concern about the liquidity levels of Hidili Industry International Development, Bumi Resources and Mongolian Mining. The firm says that these companies are facing a lot of liquidity and refinancing risks over the next one year or so. Additionally, as liquidity is vital for Asian coal producers amid oversupply and high leverage, these companies are at risk.
Earlier, also it was reported that most of the coal producers rated by Moody’s are taking steps to preserve capital and weather the prolonged weak market conditions, particularly when coal prices have fallen close to or below the marginal cost of production. According to some sources coal producers have suspended their capital expansion plans.
Many coal producers are trying to cut their greenfield investments and have started focusing on their improving operating efficiencies. Some other coal producers with very weak liquidity are considering selling non-core assets.
Moody’s report also clears that global coal supply will continue to outstrip demand. This according to them is happening due to the fact that low-cost producers are likely to increase production to maximize cash flows from operations.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org