Allied Nevada Gold Corp. (OTCMKTS:ANVGQ) Downgraded To Ca From Caa1

Moody’s Investors Service, downgraded Allied Nevada Gold Corp. (OTCMKTS:ANVGQ)’s corporate family rating to “Ca” from “Caa1” with outlook stable. The probability of default rating stands at D-PD compared to previous rating of Caa1-PD. The downgrades came after the company’s recent disclosure in the first week of March that it voluntarily opted for relief under Chapter 11 of the U.S Bankruptcy Code. As the company has entered bankruptcy, therefore, Moody’s will withdraw its ratings from the company.

The protection

Allied Nevada filed for bankruptcy protection as it buckled under a massive debt load amidst weaker metal prices. The company owns the Hycroft open pit silver and gold mine in Nevada. It stated that it intends to restructure its massive debt, which was at $543 million at the end of September. As per the proposed measures, the company’s vendors and creditors are expected to receive payment in the full.

The operations

The Hycroft mine is anticipated to continue its operations during the restructuring period. However, analysts do not expect much residual value after the process considering the massive debt load and limited free cash flow with company. Van Eck Associates, is the biggest shareholder in Allied Nevada Gold Corp. (OTCMKTS:ANVGQ), with a stake of 5.65% at the end of December 2014. The California Public Employees’ Retirement System has 2.3% stake in the company while Paulson & Co Inc. owns 1.2%.

Commodity prices

Silver and gold prices are down around 48% percent and 31% respectively in the last two years. Several analysts began raising concerns in 2014 about Allied Nevada’s large debt load, weak cash position and short mine life. The company stated secured lenders and ‘Note’ holders controlling or owning over 67% of its notes have decided to support the restructuring process. It even agreed to a secured credit facility amounting to $78 million that will be used to keep Hycroft functioning.

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