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The ratings downgrade comes as the continued to decline in the coal price prompted the ratings agency to re-assess the company’s financial metrics and ability to survive a prolonged downturn in coal prices.
Moody’s forecasts that Peabody’s debt/EBITDA ratio will approach 9x in 2015 and leverage will remain elevated at about 7x in 2016.
If Peabody does not embark on asset sales, it would generate free cash flows in 2015 and 2016, according to Moody’s.
Investors in US coal mining companies like Peabody, Alpha Natural Resources, and Walter Energy have also become increasingly skittish as a Supreme Court decision looms on the legality of EPA rules which have caused some utilities to close coal fired plants.
