Moody’s drops Atlas Iron, loan to Ca

Moody's Investors Service said it downgraded Atlas Iron Ltd.’s corporate family rating and $267 million senior secured term loan B due December 2017 to Ca from Caa3.

The outlook is negative.

The rating action follows Atlas' Dec. 23 announcement that it signed a debt restructuring support agreement with 75% of its term loan B lenders and an amendment to its existing syndicated facility agreement.

Under the agreement, Atlas will make a pay down of the term loan B loan of $10 million and issue shares and options in exchange for term loan B lenders to retire $132 million (A$183 million) of debt. On implementation, Atlas will have reduced its term loan debt from $267 million to $135 million and term loan B lenders will subsequently hold 70% of the company's shares and options. The maturity of the term loan B will also be extended from December 2017 to April 2021.

"If successful, the transaction will constitute a distressed debt exchange, which is a default event under Moody's definition. The downgrade of the secured term loan to Ca considers this default and our assessment of the high economic loss when compared to the original payment promise for the notes," Moody’s vice president and senior credit officer Matthew Moore said in a news release.

"Moreover, the downgrade of Atlas' corporate family rating to Ca from Caa3 reflects our concern that the company will continue to face financial stress after the transaction closes as proposed."

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