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S&P Raises CCR on Westmoreland Coal (WLB) to 'B'; Notes Committed Sales Position Over Next Year

November 19, 2014 9:07 AM EST

Standard & Poor's Rating Services said today it raised its corporate credit rating on Westmoreland Coal Co. (Nasdaq: WLB) one-notch to 'B' from 'B-'. The outlook is stable.

At the same time, we assigned our 'B' issue-level rating to Westmoreland's first-lien term loan. The recovery rating is '3', indicating our expectation for meaningful (50% to 70%) recovery in the event of a default.

"The stable outlook is supported by Westmoreland's committed sales position over the next year, which should result in stable cash flows," said Standard & Poor's credit analyst Chiza Vitta. "The company's long dated cost plus contracts provide protection against price volatility while the mine mouth strategy offers transportation and delivery advantages. We anticipate liquidity will remain adequate over the next year given our expectation of manageable capital spending and positive free cash flow starting in 2015."

We could lower our rating on Westmoreland if liquidity falls to a level we view as "less than adequate". This could be the result of unanticipated expenses associated with future acquisitions or if any operational issues cause production shortfalls.

We would consider a positive rating action if leverage is sustained below 5x or if the diversification in incoming cash flows increases to a point that we view to be more consistent with a "fair" business risk profile. The latter scenario is less likely to occur over the next 12 months.



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