Moody's rates Yanzhou Coal securities Ba2

Moody's Investors Service said it assigned a provisional Ba2 rating to the subordinated guaranteed perpetual capital securities to be issued by Yanzhou Coal International Trading Co Ltd. and guaranteed by Yanzhou Coal Mining Co Ltd.

Moody's said it affirmed Yanzhou Coal's Baa3 issuer rating and the Baa3 rating of the bonds issued by Yancoal International Resources Development Co. Ltd. and guaranteed by Yanzhou Coal.

The outlook is negative.

Proceeds will be used for debt repayment and general corporate purposes.

"The hybrid securities will provide additional funding to Yanzhou Coal for the purposes of managing its business in a down cycle," Alan Gao, a Moody's vice president, said in a statement.

Yanzhou Coal's Baa3 rating reflects its quality operating coal mines, leading market position in China, long operating track record and strong balance sheet liquidity, the agency said.

The Baa3 rating also factors in Yanzhou Coal's status as a provincial state-owned enterprise in the strategic resources sector under the Shandong provincial government, the agency noted.

Yanzhou Coal's credit strength is constrained by the operational and financial challenges of integrating its Australian operation, Gloucester Coal, Moody's said.

Moody's said it expects debt leverage to improve, with debt to EBITDA at 3 times to 3.5 times in the next 12 to 18 months, down from 4.1x in 2012.

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