Standard & Poor’s has lowered its corporate credit rating for troubled U.S. rare earths producer Molycorp from ‘CCC+’ to ‘CCC’ with a negative outlook.
“The downgrade reflects our view of the company’s deteriorating liquidity position,” said S&P in making its second downgrade of Molycorp in less than a year.
“The negative outlook reflects our view that it is unlikely to have cash on hand to meet operational and working capital needs, interest, and capital spending over the next year,” the ratings agency observed.
“In our view, the company’s capital structure is unsustainable, and we believe that the company’s sources of liquidity may not be sufficient to cover operational and working capital needs, interest, and capital spending over the next year,” said Standard & Poor’s Credit Analyst David Kuntz. “We believe it is likely to conduct some form of capital restructuring during that time, which could include a distressed debt exchange.”
“We do not believe an upgrade is a likely scenario over the next year given our view of the company’s unsustainable capital structure and eroding liquidity position,” S&P advised.
Molycorp’s flagship Mountain Pass facility near Las Vegas is ramping up production as process optimization and debottlenecking efforts are helping to strengthen the system, as well as increase recoveries and throughput.
However, during the first quarter of this year, Molycorp reported a net loss of $88.9 million or 40-cents per share. The company reported a net loss of $374.4 million or $2.21 per share in 2013.