Mongolian Mining Corp. Rating Lowered To #CCC-# From #CCC# On Potential Notes Res Outlook Negative

Stocks and Financial Services Press Releases Wednesday January 27, 2016 16:45
SINGAPORE--27 Jan--Standard & Poor's

SINGAPORE (Standard & Poor's) Jan. 27, 2016--Standard & Poor's RatingsServices today lowered its corporate credit rating on Mongolian coal minerMongolian Mining Corp. (MMC) to 'CCC-' from 'CCC'. At the same time, welowered our issue rating on the company's US$600 million senior unsecurednotes to 'CCC-' from 'CCC'.

The downgrade follows MMC's announcement that it has hired advisors to provideadvice on the potential restructuring of the company's outstanding notes. Webelieve any transaction or debt exchange would likely be substantially belowpar value, given that the company's unsecured notes currently trade below 30cents on the dollar.

As per our criteria, we would view an exchange as distressed if, in our view,the offer implies that the investor will receive less value than the originalsecurities promised; and is distressed rather than purely opportunistic.

"We believe a default is likely within the next six months barring anagreement with the company's creditors on a restructuring," said Standard &Poor's credit analyst Xavier Jean. "This is because MMC needs to repay morethan US$150 million in debt amortization and interests in 2016. The company's

US$600 million notes also mature in 2017. This compares with our estimate ofcash balance below US$50 million as of Dec. 31, 2015."

MMC has been cutting operating costs substantially over the past 12 months tostabilize its operating performance. Although the company could break-even onan EBITDA basis in 2016, it still faces a substantial interest servicingburden and rapid cash depletion.

The outlook is negative, reflecting the likelihood that the company may pursuea capital restructuring or debt exchange that we would view as distressed.

"We will lower the rating if MMC announced a capital restructuring that weview as a distressed exchange. We will also lower the rating if restructuringdiscussions with bondholders take time and the company misses a payment oninterest or debt due in the meantime," Mr. Jean said.

Although unlikely, we could raise the rating if we no longer believed acapital restructuring or debt exchange was likely over the next year and thelikelihood of a default has reduced. A rating upgrade would be contingent uponMMC's liquidity having strengthened substantially with a reduced risk of a

default beyond the next 12 months. This could happen if the company raisessufficient cash to match its short-term debt and interest repaymentobligations.

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