Moody’s issued a (P)Baa3 rating with a stable outlook to the company’s proposed $US250 million of senior secured notes, which will be used by parent company NCIG Holdings to repay debt.
The provisional rating was attributed to NCIG’s ahead-of-schedule and under-budget completion of expansion activities on Kooragang Island at the Port of Newcastle in NSW.
The mechanical upgrade increases NCIG’s nominal capacity to 53 million tonnes of coal per annum.
Moody’s also cited NCIG’s stable cashflow generation and risk-mitigating shipping arrangements, which insulate the operator from unexpected drops in throughput volume.
However, downward pressure on the encouraging rating could result from major delays or cost overruns with continued expansion work or a weakening in demand for coal in the terminal’s catchment area.
“The ratings are supported by the group’s stable cashflows derived from ship or pay agreements entered into with its shipper shareholders and third-party shippers for the entire terminal capacity, as well as the ability to pass all operating costs (uncapped) and financing costs (up to a predetermined cap) on to its shippers”, Moody’s assistant vice president and analyst Matthew Moore said.
“The rating is also supported by the company’s progress to date on its expansion activities.
“This is balanced against the group’s highly leveraged capital structure with limited equity and thin coverage ratios (when balanced against all tiers of capital), the potential for unexpected execution challenges and cost overruns as the company expands the terminal export capacity and exposure to counterparty risk of its shippers.”