MARKETS SPECTATOR: Boart's long year?

Shares in Boart Longyear have fallen after its credit rating was downgraded and following the release of reduced earnings guidance yesterday.

Boart Longyear shares plunged as much as 14 per cent after credit rating agency Moody’s downgraded the company’s debt rating.

Moody’s cited “a significant shift in the downside in the company’s core business evidenced by the pullback in exploration and drilling expenditures as well as new capital investment” by Boart’s customers, the mining companies.

At 1238 AEST Boart shares were down 6.8 cents, or 11 per cent, to 55.7 cents, after falling as low as 54 cents. The stock has plunged 81 per cent in the last 12 months.

Yesterday the company told the ASX that analyst estimates for its 2013 revenue – between $US1.35 billion to $US1.55 billion – as well as earnings before interest, tax, depreciation and amortisation, $US176-$US211 million, “should be reduced below these ranges”.

Moody’s expects Boart’s business to not improve for at least another year.

“Headwinds continue to exist with respect to end markets served,” says Moody’s, referring to Boart’s contract drilling and other mining services businesses. “Exploration and development in the mining industry as well as new mine development will remain subdued over the next 12-18 months given the current volatility in prices and slowing global economic indicators.”

Moody’s downgraded Boart’s corporate debt rating to Ba3, from Ba2. Both ratings are below investment grade. The company’s senior unsecured note rating was downgraded to Ba1 from Ba2 “reflecting the weaker position of this debt instrument in the company’s capital structure”, says Moody’s. Boart has a $450 million revolving credit facility.