Reuters: Global Markets: S&P cuts rating on James River Coal, shares drop

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S&P cuts rating on James River Coal, shares drop Jun 26th 2012, 15:06 Tue Jun 26, 2012 11:06am EDT (Reuters) - Standard & Poor's Corp cut its corporate credit rating on James River Coal Co (JRCC.O), pushing it further into junk territory due to a milder-than-normal U.S. winter and the increasing switch from coal to cheaper natural gas by utilities. The company's shares, which have lost 62 percent of their value this year, fell as much as 22 percent on the Nasdaq on Tuesday. "Based on our expectation that coal markets will be weaker through 2013, we believe that the company's liquidity is likely to deteriorate," the ratings agency said. S&P said it expected James River to spend between $40 million and $50 million this year, and that cash flows from operations would not be enough to cover capital expenditures. The company had $169.4 million in cash and cash equivalents, and debt of $585.8 million as of March 31, according to Thomson Reuters Data. "In 2013, barring an improvement in shipments and pricing, which at this point we do not anticipate, we expect the cash burn to increase," the agency said. Over the last year, Richmond, Virginia-based James River has diversified into more-lucrative metallurgical coal as the market for thermal coal, which is used in power plants, remains weak. But prices of metallurgical, or steelmaking, coal are also declining because of fewer production disruptions in Australia and slowing demand in China and the euro zone. S&P, which lowered its corporate credit rating on James River Coal to 'CCC+' from 'B-', expects the company to earn about $100 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2012, below the $170 million in EBITDA it generated in 2011. James River shares were down 17.8 percent at $2.40 in late morning trading. (Reporting by Swetha Gopinath in Bangalore; Editing by Ted Kerr) Link this Share this Digg this Email Reprints

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