Moody's lowers Geo Energy view to negative

Moody's Investors Service said it affirmed the B2 corporate family rating for Geo Energy Resources Ltd.

The agency also affirmed the B2 rating on the senior unsecured guaranteed notes issued by Geo Coal International Pte. Ltd., a wholly owned subsidiary of Geo Energy, Moody's said.

Moody's also revised the outlook to negative from stable.

The negative outlook reflects an expectation that Geo Energy's credit profile will remain weak for its current ratings in the absence of a material increase in production at its existing mines, Moody's said, and uncertainty over Geo Energy's ability to acquire suitable coal assets in the near term to improve consolidated earnings and cash flow.

Geo Energy's adjusted leverage, as measured by adjusted debt-to-EBITDA ratio, currently breaches the downward rating trigger of 4x for its B2 ratings, the agency said.

Adjusted leverage increased to about 4.5x in 2018 from 4x in 2017 due to lower earnings on the back of lower sales volumes and higher operating costs, Moody's said.

The company's inability to materially increase production in 2019 will constrain Geo Energy's earnings growth and weigh on its credit profile, which remains highly susceptible to changes in coal prices given its small scale, the agency added.

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