S&P affirms Consol Energy, off watch

Standard & Poor's said it affirmed its ratings on Pittsburgh-based Consol Energy Inc. and removed the senior unsecured debt rating from CreditWatch with negative implications. The outlook is stable.

The affirmation of the senior unsecured debt rating reflects S&P's assessment that senior unsecured lenders will not be significantly disadvantaged due to collateral posted for the credit facility and the $125 million accounts receivable securitization program.

The ratings on Consol reflect the company's high degree of financial leverage, which includes meaningful debt and postretirement obligations, liquidity policy in light of surety bonding concerns, and its significant expansion efforts to increase production and develop its coal bed methane properties with the objective of reducing its relatively high cost position. The ratings also reflect Consol's strength as an efficient producer of underground coal, its significant reserve position, improving coal industry conditions and energy diversification strategy.

Consol's debt leverage is aggressive with the total debt to total capital at 67% and total debt to last-12-month EBITDA at 3.1x (excluding other income and adjusted for operating leases) for the period ending Sept. 30. Furthermore, Consol's balance sheet is significantly burdened by unfunded postretirement liabilities of $2.1 billion and black lung, mine closing, workers compensation, and reclamation liabilities totaling $1 billion.

Still, Consol's key credit protection measures of last 12 months' FFO/TD and last-12-month EBITDA (excluding other income) to interest of 23% and 4.9x are commensurate for the rating.

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