S&P cuts Alpha Natural

Standard & Poor's said it lowered its corporate credit rating on Alpha Natural Resources Inc. to B from B+. The outlook is stable.

S&P also lowered its issue-level rating on Alpha's senior secured term loan due 2020 to BB- from BB. The recovery rating on the term loan remains 1, indicating an expectation of very high (90% to 100%) recovery in the event of payment default.

In addition, the agency lowered its ratings on Alpha's $500 million senior unsecured notes due 2018, $800 million senior unsecured notes due 2019, $700 million senior unsecured notes due 2021 and $345 million 3.75% convertible notes due 2017 to B- from B+. S&P also revised the recovery ratings on those notes to 5 from 4. The 5 recovery rating indicates an expectation for modest (10% to 30%) recovery in the event of payment default.

At the same time, S&P lowered its rating on Massey Energy Co.'s 3.25% convertible notes due 2015 to CCC+ from B. S&P also revised the recovery rating on those notes to 6 from 5. S&P also lowered the rating on Alpha's 2.375% convertible notes due 2015 to CCC+ from B-.

The recovery rating on those notes remains 6. The 6 recovery rating on the Massey and Alpha convertible notes indicates an expectation of negligible (0% to 10%) recovery in the event of payment default.

S&P said the downgrade reflects its view that Alpha's operating earnings and leverage measures will remain weak in 2013 and 2014, with EBITDA below $500 million and debt to EBITDA in excess of 8x each year. S&P said it believes measures will only improve modestly in 2015 as coal markets slowly improve.

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