Moody's downgrades Teck Cominco

Moody's Investors Service said it lowered Teck Cominco Ltd.'s corporate family rating, probability-of-default rating and senior unsecured regular bonds to Ba3 from Ba1 and assigned an SGL-4 speculative-grade liquidity rating to the company.

This concludes the review for possible downgrade that began on Nov. 25, and the outlook is negative.

The agency said the downgrade reflects Teck's elevated debt level in sharply lower base metals and metallurgical coal price environments, significant scheduled term loan payments and the Oct. 29, 2009 maturity of the remaining $5.35 billion of the bridge loan.

Moody's believes that in the current metals and metallurgical coal price environment, Teck will produce breakeven-to-modestly negative free cash flow in the last three quarters of 2009, thereby relying entirely on asset sales and a tax refund to reduce debt. Meeting scheduled debt maturities will also require an extension of the bridge facility and capital markets refinancing in challenging markets, the agency added.

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