S&P: Yanzhou Coal on negative watch

Standard & Poor's said it placed the BBB- long-term corporate credit rating on Yanzhou Coal Mining Co. Ltd. and the BBB- long-term rating on its senior unsecured notes on CreditWatch with negative implications.

The agency also said it placed the company's cnA- long-term Greater China regional scale ratings and the notes on CreditWatch with negative implications.

The CreditWatch placement reflects a view that Yanzhou's financial position may not improve as much as previously anticipated, S&P said.

The agency said it expects Yanzhou's proposed issuance of renminbi-denominated bonds to significantly increase its leverage even though the company may use a part of the proceeds to pay off short-term debt.

This is in marked contrast to the S&P's earlier estimate that Yanzhou would control its borrowings and reduce its leverage by lowering costs, cutting back capital expenditure and raising equity.

China's industrial activity has been decelerating, which suggests that the expectation of an economic recovery may not materialize, the agency said.

Continued weak demand for coal and depressed coal prices are putting more pressure on Yanzhou's cash flow and leverage than anticipated, S&P added.

The agency also said it believes the company's capital structure may weaken in the second half of 2013 against the original expectation of an improvement.

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