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Utah-based, Australian-listed Boart increased the covenant levels on its debt yesterday to provide flexibility during the current downturn, which was hitting its drilling business hard.
As a result, Moody’s downgraded Boart’s corporate family rating to Ba3 from Ba2 and its probability-of-default rating to Ba3-PD from Ba2-PD.
Boart’s senior unsecured note rating was lowered to B1 from Ba2, while the ratings outlook was negative.
Moody’s cited the pullback in exploration and mining investment, as well as the weaker position of the debt instrument in Boart’s capital structure, as reasons for the rating changes.
“The negative outlook reflects our expectation that headwinds continue to exist with respect to end markets served and that exploration and development activity in the mining industry as well as new mine development will remain subdued over the next 12-18 months given the current volatility in prices and slowing global economic indicators,” Moody’s said.
“The outlook also anticipates that 2014 performance will likely be below that of 2013 as the current weak market conditions have a more material impact on full-year 2014.
“In addition, we expect that new mine development will continue to be slowed by increasing political, environmental, and local community issues.”
Yesterday, Boart said the full-year outlook given at its May annual general meeting was now out of date and analyst expectations for revenue of $US1.35-1.55 billion ($A1.47-1.69 billion) and earnings before interest, tax, depreciation and amortisation of $176-211 million should be reduced below those ranges.
Macquarie acknowledged the company’s announcement and adjusted its forecasts.
“Our revised $1.29 billion FY13 revenue and $156 million EBITDA is below the low end of consensus ($1.35 billion revenue and $176 million EBITDA), in line with BLY’s updated guidance,” Macquarie said.
“This represents a 15% and 22% reduction versus our prior forecasts.”
Macquarie lowered its price target for Boart to A88c from $1.40.
“Sentiment is likely to remain negative in the near term given ongoing commodity price volatility and junior funding difficulty,” analysts said.
After falling more than 7% yesterday, Boart shares slumped a further 10% to 56.2c.
