Perth-based miner Mirabela Nickel has been hit with a 'selective default' rating following a missed interest payment.
Standard & Poor's said today that it had lowered its corporate credit rating on the Brazil-focused Mirabela to 'SD' from 'CCC+'.
It has also lowered the credit rating on the $US395 million of convertible notes issued by the company to 'D' from 'CCC+'.
The rating actions stem from Mirabela's announcement this week that it did not make an interest payment of about $US17.3 million on its 8.75 per cent senior notes, which was scheduled for payment on October 15 2013. This non-payment would only constitute a default under the terms of the notes if it is not remedied within the 30-day grace period, which will end by November 15.
Standard & Poor's credit analyst Thomas Jacquot is uncertain if Mirabela will make the payment.
"At this stage, we are uncertain about Mirabela's willingness to make the payment within the grace period, although we believe that it currently has sufficient cash to meet that obligation," Mr Jacquot said.
"The company had about $US80 million of cash at the end of August 2013."
On September 27, Mirabela announced that Votorantim Metais Niquel had served notice to the company of its intention to terminate its offtake agreement at the end of November.
The agreement was scheduled to expire at the end of 2014.
As Mirabela has a $US50 million loan from Banco Bradesco secured on the Votorantim receivables, termination of the offtake agreement could lead to a default under the Bradesco loan which, if not remedied, could lead to a cross default under the $US395 million notes.
On October 22, Mirabela announced that it had not paid the interest due on the notes.
"We consider a missed interest payment as a default when the non-payment has occurred and is continuing for at least five business days from the scheduled payment date. This is even though a payment default has not occurred according to the legal provisions of Mirabela's notes, which incorporate a 30-day grace period," Mr Jacquot said.
The company has indicated its intention to provide a further update to the markets by the end of October. Should the interest payment remain unpaid by November 15, S&P would be expected to lower the corporate credit rating on Mirabela to 'D'.
S&P believes that any potential upward movement on the rating above 'SD' is uncertain at this stage, both in terms of likelihood and magnitude.
Mirabela's share price was 1.6 cents when it suspended trade earlier this month.