OREANDA-NEWS. RusRating has changed the outlook on OOO Kingcoal's credit ratings from “stable” to “negative”.

The change in outlook reflects operating cash flow insufficient to service long-term debts connected with the ongoing modernisation of production processes and depressed global coal prices.

The rating is based on fully renewed equipment at two of the mines in the Rostov region, high anticipated production and the associated strong operating margin once the renewal of all facilities is complete; stable revenues from productive assets in the Russian Far East; and above-average demand for Rostov coal at this time as a result of reduced imports from Ukraine.

Constraining factors include low current operating cash flow, a non-transparent ownership structure, low capacity utilisation as new coal faces are prepared and brought into production, and a growing debt burden.

OOO KingCoal is a private-sector limited liability coal company that operates production facilities in the Rostov region plus Primorye region in the Russian Far East. Cyprus-registered Kingcoal Group Limited holds a 90% stake in the Company and the remainder is held by General Director V.G. Pozhidayev. The ultimate beneficiary owners of Kingcoal Group Limited have not been identified.

The Company's debt burden is judged high and returns are low due to the growing cost of modernising production facilities. The balance sheet is dominated by non-working assets, principally a coal strip mine in Russia's Far East and four underground mines in the Rostov region, one of which is not in operation. Risk sensitivity is high. Liquidity is sufficient.

RusRating is an independent rating agency accredited by the Ministry of Finance of the Russian Federation. The company was set up in 2001 and is a member of the GlobalRating group. Its primary services are the provision of credit ratings to banks, industrial firms and their debt instruments; it also provides analysis of various aspects of the Russian financial sector.