S&P puts Newcastle on positive watch

S&P said it placed the BBB- rating on the senior secured debt issued by Newcastle Coal Infrastructure Group Pty Ltd. on CreditWatch with positive implications, along with the B rating on the junior debt issued by NCIG Holdings Pty Ltd.

The CreditWatch placements reflect an understanding that Newcastle intends to implement a senior debt service reserve account of $85 million, which is about equal to six months of senior debt service.

On Jan. 24, NCIG issued notices to all its shippers, giving them an option to provide a letter of credit equal to their share of the reserve account by Feb. 28, S&P said.

Alternatively, shippers may opt for an increase in their toll charge to fully cash fund the reserve over the next few months, the agency said.

The shippers, rather than NCIG, will stand behind the letters of credit and be liable to an issuing bank in the event of a draw, S&P said.

The addition of the reserve account will not affect the credit support that each shipper has provided to NCIG, the agency said.

The ratings reflect a view of the coal terminal's relatively simple and straightforward operations and maintenance task, S&P said, and strong ship-or-pay contracts with its shippers.

The contracts further limit operational risk because shippers are required to pay even if no coal is shipped, the agency said.

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