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Westmoreland's (WLB) Ratings Unaffected by Buckingham Coal Acquisition, $50M Loan Add-On - S&P

January 9, 2015 1:54 PM EST

Standard & Poor's Ratings Services said today that its ratings and outlook on Westmoreland Coal Co. (Nasdaq: WLB) are unaffected by the company's $34 million acquisition of Ohio-based coal supplier Buckingham Coal Co. LLC and proposed $50 million add-on to its $350 million first-lien term loan due 2020.

Westmoreland's corporate credit rating remains 'B' with a stable outlook. The issue-level ratings associated with the company's senior secured debt, including the first-lien term loan and $350 million in senior secured notes due 2022, also remain 'B' with a recovery rating of '3', indicating our expectation of meaningful (50% to 70%) recovery in the event of default.

We assess Westmoreland's business risk profile as "weak" and financial risk profile as "highly leveraged." The stable outlook is supported by Westmoreland's committed sales position over the next year, which should result in stable cash flows. The 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.



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