Shares in Coronado Global Resources Inc (ASX: CRN) have been slammed on Tuesday after the company issued a warning that it could breach its debt covenant obligations, which could put its very existence at risk.
The coal company published its quarterly report on Tuesday, which showed revenue for the nine months to the end of September 30 had fallen from US$1.89 billion to US$1.38 billion.
The company reported a net loss of US$281.9 million for the period, compared to a loss of US$54.8 million for the same period in the previous year.
Image source: Getty Images
Company on the ropes
The company also issued a "going concern" notice in its financial report, which indicated there could be concerns about the company's viability in the near future.
As the company said in its statement to the ASX:
The company's earnings and cash flows from operating activities have been significantly impacted by the continued subdued performance of metallurgical coal markets, which has led to low realised prices for the coal the company sells. For the three and nine months ended September 30, 2025, the company incurred net losses of $109.5 million and $281.9 million, respectively.
Coronado also revealed that ratings agency S&P had downgraded its credit rating from B minus to CCC+ – a rating which indicates a high risk of default – while Moody's had also downgraded the company's credit rating, from Caa1 to Caa2.
The company also said it might have problems meeting its working capital requirements, which could spill over into a default on one of its debt facilities.
As the outlook for metallurgical coal markets remains uncertain, continued low or a further deterioration in metallurgical coal prices and the company's inability to achieve production forecasts, due to factors beyond the company's control, could lead to an inability to fund short-term working capital movements, further operating losses and negative operating cash flows for the remainder of 2025 and into 2026, which, combined with other factors, could impact the company's ability to comply with financial covenants under the ABL Facility on and beyond December 31, 2025.
Non-compliance with those financial covenants, "or a further two or more notches downgrade to the company's credit rating by S&P or Moody's as at September 29, 2025", could result in a default under the ABL facility, the company said, which could also lead to a cross-default of another financial instrument.
Viability in question
Coronado said it had entered into a transaction with customer Stanwell Corporation, which was intended to shore up its balance sheet, but there remained a substantial risk to its solvency.
As the company said:
While management believes that the proposed transaction, if entered into and once completed, would enhance the company's liquidity, the vast majority of the potential funding under the arrangement is delivered over time and not upfront, and does not eliminate uncertainties in relation to the company's future financial performance, including the company's ability to achieve its production targets and manage working capital fluctuations that are material at times depending on circumstances (production and inventory levels), due to events and factors beyond its control, and sustained weakness in metallurgical coal markets and consequential realised metallurgical coal prices. Accordingly, management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern within one year after the date of these condensed consolidated financial statements.
Coronado shares fell 29.73% on the news to be changing hands for 26 cents.
