Moody's upgrades Atlas

Sydney, May 30, 2016 -- Moody's Investors Service has upgraded Atlas Iron Limited's corporate family rating (CFR) to Caa3 from Ca. At the same time, Moody's has upgraded Atlas' senior secured bank credit facility to Caa3 from Ca.
The outlook is stable.

RATINGS RATIONALE

The rating action follows Atlas' announcement on 6 May 2016 that it has implemented a creditors' scheme and completed its debt restructuring. The transaction constitutes a distressed debt exchange, which is a default event under Moody's definition.

As part of the scheme, Atlas has reduced the principal outstanding on its Term Loan B to USD135 million from USD267 million and extended its maturity date to April 2021 from December 2017.

"The upgrade reflects Atlas' improved capital structure following the completion of its debt restructuring," says Saranga Ranasinghe, a Moody's Assistant Vice President / Analyst.

"The upgrade also reflects the approximate AUD20 million interest saving resulting from the lower debt and interest rates, which should further help lower the cost per tonne produced," adds Ranasinghe.

Despite its improved capital structure, Atlas -- as a single commodity producer -- remains extremely sensitive to the volatile iron ore price and foreign exchange rates. The iron ore price has recovered from its record low, but remains very volatile.

Under Moody's revised expectations of USD40/tonne - USD45/tonne in 2016 and 2017, Atlas' realized price will likely remain below breakeven levels in the near term, barring further material cost reductions and/or a depreciation of the Australian dollar against the US dollar. This situation will pressure its minimum cash covenant of AUD35 million at the end of each calendar month. Accordingly, the risk of default remains high.

The stable outlook reflects Moody's expectation that Atlas is well positioned in the Caa3 rating level.

The rating could be upgraded or the outlook changed to positive if a sustained improvement in iron ore prices above break even levels and/or further cost reductions lead to an improvement in margins. Specifically, Moody's would look for positive free cashflow generation by the company and cash levels comfortably above the minimum cash covenant.

The rating could be downgraded if the already weak fundamentals for iron ore deteriorate further, leading to negative free cashflow and reducing headroom under its minimum cash covenant.

The principal methodology used in these ratings was Global Mining Industry published in August 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Atlas Iron Limited (Atlas), headquartered in Perth, Australia, is an iron ore producer and developer focused on the North Pilbara region of Western Australia. Atlas exports iron ore from its current three producing mines.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.



For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.



Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Saranga Ranasinghe
AVP - Analyst
Corporate Finance Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (852) 3551-3077

Patrick Winsbury
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (852) 3551-3077