DBRS Releases Report on Noranda Operating Trust

DBRS has today released a report on Noranda Operating Trust (the Trust) that provides further detail on the recent confirmation of the Trust’s Senior Secured Notes rating at BB (high) with a Stable trend.

The Trust remains a well-established and currently profitable processor of zinc concentrates strategically located to serve North American zinc metal markets, but is highly dependent on a zinc concentrate supply and processing agreement with Glencore Canada Corporation that ends its initial term in May 2017.

The Trust’s indebtedness has been dramatically reduced since 2009, currently standing at $59.6 million, although debt increased in the first half of 2014 due to unexpectedly high costs and working capital needs. DBRS expects better earnings and operating cash flow in H2 2014, but given the uncertainty around the source of concentrates, earnings and cash flow are expected to be lower and more variable than historically. The Trust’s credit metrics weakened in H1 2014 despite lower debt although they remain adequate for the rating.

The Trust has continued to restrict distributions to provide funds to maintain the operational capability of its zinc processing facility (CEZinc) and to build resources to accommodate any transition/remediation/closure costs that may be incurred post-May 2017. DBRS views this as a prudent action given that the viability of the CEZinc facility post-May 2017 remains in doubt.

Today’s report and the October 16, 2014, press release are available at www.dbrs.com or by contacting us at info@dbrs.com.

Note:
All figures are in Canadian dollars unless otherwise noted.