Rating Action: Moody's assigns first-time (P)B2 corporate family rating to Tiger Resources, Outlook Stable
Global Credit Research - 31 Oct 2014
Sydney, October 31, 2014 -- Moody's Investors Service has today assigned a first time provisional (P)B2 corporate family rating to Tiger Resources Limited (Tiger). At the same time, Moody's has assigned a provisional (P)B2 senior secured rating to the potential US$250million senior secured notes. Outlook on all ratings is stable.
This is the first time that Moody's has assigned ratings to Tiger.
The corporate family rating is provisional on the issuance of the bonds and the successful refinancing of the existing short term debt facilities. The assignment of a definitive rating to the Senior Secured Notes is subject to review of the final documentation.
RATINGS RATIONALE
"Tiger's ratings reflect the high business risk profile of the company, essentially due to the significant concentration risk in terms of geography in the low-rated Democratic Republic of the Congo (DRC) (B3 Stable)" says Saranga Ranasinghe, a Moody's Analyst. "Tiger derives 100% of its earnings from its operations in the DRC," adds Ranasinghe.
"The rating also reflects Tiger's sensitivity to the movement in volatile copper prices, its focus on a single commodity and its operational and geographic concentration and limited scale" says Ranasinghe.
The rating is supported by Tiger's low cost position and improving track record of production and project execution. "The company is undergoing a significant capacity expansion that will see production doubling to 50ktpa in the next 12-18 months," Ranasinghe says, adding, "the higher production, if achieved as planned, will strengthen Tiger's fundamental credit profile, which is currently consistent with a (P)B2 rating and could support a higher rating, depending on the operating environment and the company's business strategy and financial policy at that time."
"However, major missteps in executing on the growth plan could pressure the rating," Ranasinghe adds.
The rating is also supported by our expectations for robust credit metrics for the company. "Tiger has historically had very low leverage and high coverage levels. However, following the notes issuance, Tiger's leverage is expected to increase significantly from current levels and to peak at around 5.0x-5.5x in FY14" says Ranasinghe.
This level of leverage compares with our rating tolerance of 5.5x. With the planned increase in production, we expect a recovery in FY15 to around 3.0x-3.5x, thereby strengthening the company's position within the rating.
The stable outlook reflects our expectations that Tiger will maintain adequate credit metrics for the (P)B2 rating following the completion of the phase 2 SXEW expansion. Our rating is predicated on the company completing the expansion on time and within budget. While we expect copper prices to remain range bound in the next 12-18 months, we expect Tiger to maintain headroom within the threshold set for the rating at 5.5x Debt/EBITDA.
A change in outlook and/rating is unlikely in the short term given the interdependence between Tiger's credit profile and the sovereign's high risk as represented by the B2 local currency ceiling, which will continue to be a rating constraint. Tiger's fundamental credit profile, which is currently consistent with a (P)B2 rating, will likely strengthen upon completion of the expansion project and upon reaching name plate production capacity. However, the corporate family rating will likely be constrained at the country ceiling given the geographic concentration risk.
The rating and/or outlook could face negative pressure if copper prices remain outside our base case expectations or there is a negative sovereign rating action on the DRC. The ratings could also face negative pressure if there are any material cost increases and/or delays to the expansion project delivery, leading to concerns about the company's production profile, liquidity, and/or credit metrics. Specifically, an inability to maintain debt-to EBITDA below 5.5x on a consistent basis could pressure the outlook and/or rating.
Tiger Resources is a copper miner with operations in the Democratic Republic of Congo.
The principal methodology used in this rating was Global Mining Industry published in August 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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
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
Terry Fanous
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
TGS Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held
