Moody's Investors Services sees no immediate
impact on Winsway Coking Coal Holdings Limited's (01733) Ba3 corporate family rating and
B1 senior unsecured bond rating from its recent agreement on another coal supply contract
with Mongolyn Alt LLC (MAK).
The outlook for the ratings is stable.
Under the agreement, MAK will supply at least 3 million tonnes of coking coal per annum
to Winsway from 2012 for 10 years. Price will be determined quarterly based on market
prices.
"Securing supply on a long-term basis is credit positive and is consistent with
Winsway's business strategy, and which Moody's has already factored into the ratings,"
said Ken Chan, a Vice President and Senior Analyst at Moody's, adding, "With the new
contract in place, around 70% of Winsway's targeted Mongolian coal procurement volume in
2012 will be backed by long-term contracts, up from below 50% currently."
Furthermore, Moody's views the new contract as an extension of Winsway's existing
business relationship with MAK, which supplied about 1.2 million tonnes to the company in
2010.
In terms of the carrying capacity of its railway, Moody's said Winsway can transport
around 8 million tonnes annually. Therefore, it will need to invest further in rolling
stock to support total projected volume of around 10 million tonnes in 2012.
It added that Winsway's business growth remains supported by its healthy liquidity
position -- cash on hand of HKD5.8 billion as of June 2011 and short-term debt of HKD572
million. Such a strong position is partially attributable to the presence of unused
proceeds from its issuance of USD500 million in bonds early this year. (KL)