OREANDA-NEWS. S&P Global Ratings today said it raised its issue-level rating on Canada-based gold mining company IAMGOLD Corp.'s senior unsecured notes to 'B+' from 'B' and revised its recovery rating on the notes to '2' from '4'. A '2' recovery rating corresponds with substantial (70%-90%; high end of the range) recovery in our simulated default scenario, and an issue-level rating that is one-notch above the long-term corporate credit rating.

"The upgrade and revision to the recovery rating are based on the lower amount of debt outstanding in our recovery analysis," said S&P Global Ratings credit analyst Jarrett Bilous.

At the same time, S&P Global Ratings affirmed its 'B' long-term corporate credit rating on the company. The outlook is stable.

We consider the planned bond redemption to be positive to IAMGOLD's credit profile but not to an extent that warrants a change in the long-term corporate credit rating. The company announced a US$200 million bought-debt equity financing (excluding an over-allotment option) and plans to redeem US$150 million of its unsecured notes with the proceeds. Based primarily on the prospective reduction in debt, we expect the company's core ratios will improve from our previous estimates. However, we expect the company to continue to generate weighted-average credit measures that we view as commensurate with a highly leveraged financial risk profile. In addition, our business risk and liquidity assessments are unchanged, resulting in no change to our 'B' corporate credit rating on IAMGOLD.

The stable outlook reflects our view that IAMGOLD will generate core credit ratios consistent with a highly leveraged financial risk profile over the next two years, including weighted-average adjusted debt-to-EBITDA ratio of about 5x. The outlook also reflects our expectation that the company will maintain strong liquidity.

A downgrade could result from a change in our liquidity assessment to adequate from strong. In this scenario, we would expect available cash to sharply decline following a material acquisition or higher-than-expected free cash flow deficits from a severe drop in gold prices or higher-than-expected capital expenditures.

We would consider an upgrade if the company generated an adjusted debt-to-EBITDA ratio sustainably below 4x. In this scenario, we would expect the company to further reduce debt or realize what we consider to be sustainably higher margins from a gold price above our current assumptions along with relatively stable or improving cash costs.