Moody’s Investors Service reported that it downgraded Allied Nevada Gold Corp. (OTCMKTS:ANVGQ)’s ‘corporate family’ rating from “Caa1” to “Ca. ” The outlook on the company is stable. The odds of default rating now stand at ‘D-PD’ against previous rating of Caa1-PD. The rating was revised after the company’s revelation in the first week of March that it willingly opted for assistance under Chapter 11 of the U.S Bankruptcy Code. However, the company has entered bankruptcy mode and therefore, Moody’s Investors Service will withdraw its ratings.
Allied Nevada opted for bankruptcy protection as it collapsed under a colossal debt load amidst weaker commodity prices. The company possesses the Hycroft open pit mine in Nevada. It said that it wants to reorganize its massive debt, which amounted to $543 million at the end of September. The proposed measures will ensure that Allied Nevada’s vendors and creditors receive payment in the full.
Update on Hycroft mine
Allied Nevada will operate Hycroft mine during the restructuring period. However, experts anticipate little residual value after the procedure taking into account the huge debt load and inadequate free cash flow with company. The biggest shareholder is Van Eck Associates who owns 5.65% stake in Allied Nevada. The other shareholders are the ‘California Public Employees’ Retirement System’ with 2.3% stake and Paulson & Co Inc. with 1.2% stake in the company.
The metal prices
Silver and gold prices have fallen close to 48% and 31% respectively in the past two years. Last year, several experts expressed their concerns about Allied Nevada’s huge debt load, pathetic cash position and reduced mine life. In the ongoing process, secured lenders and ‘Note’ holders owning more than 67% have agreed to support the restructuring process. Also, they gave their nod for a secured credit facility of $78 million to support Hycroft mine functioning.