NEW YORK (AP) â¿¿ Shares of James River Coal slid 3 percent before Tuesday's opening bell after a trim to its credit rating from Standard & Poor's pushed the miner further into non-investment grade territory.
Late Monday, S&P lowered the rating for the Richmond, Va., company to "CCC+" from "B-." James River's ratings have been under review for a possible downgrade since February.
The ratings service also lowered its issue rating on the James River's $275 million senior unsecured notes to "B-" from "B." The recovery rating remains "2," which means S&P thinks that investors have a 70 percent to 90 percent chance of recovery in the event of a default.
Natural gas prices have plunged to 10-year lows this year and it has become increasingly favored by utilities that use coal or natural gas to generate electricity. Utilities are also preparing for stricter emission standards, driving down coal demand and forcing miners to dramatically scale back production."The downgrade reflects our assessment that market demand for coal has deteriorated such that we expect James River Coal's performance will likely be materially lower than we previously expected," said S&P analyst Megan Johnston of Standard & Poor's Ratings Services. Coal markets will be weak through 2013, Johnston said, which will likely cause the company's liquidity to deteriorate. Last week, Arch Coal Inc. of St. Louis announced plans to close three mining complexes, temporarily idle another, and lay off about 750 workers. Arch said the reductions would trim its thermal coal production by more than 3 million tons annually. Shares of James River Coal Co. fell 10 cents to $2.82 in premarket trading.