(Reuters) - U.S. coal mining shares fell on Wednesday after Patriot Coal PCX.N, which is seeking new financing, was downgraded by UBS and CRT Capital Group.
In morning trading on the New York Stock Exchange, Patriot stock was down 8.4 percent at $2.38, a day after its chairman took over the position of CEO to focus on re-establishing the company's financial health.
UBS cut Patriot's price target to $2.50 from $5.50 and CRT Capital Group downgraded the company's rating to "fair value," citing "heightened uncertainty regarding the company's refinancing status and weak cash flow outlook.
"Given the weak coal market, expected negative free cash flow, and deteriorating credit metrics, we find the risk/ reward unappealing," CRT analyst Kuni Chen said in a note.
Analysts said Patriot's troubles -- it is negotiating new loan terms after warning that a major customer might default on a contract -- probably dragged down the whole sector.
Many of Patriot's mines are located in the central Appalachian coalfields of Virginia, West Virginia and eastern Kentucky, where high costs and low coal prices are making it difficult to turn a profit.
Other central Appalachian miners' stock were lower on Wednesday morning. James River Coal Co JRCC.O fell 8.7 percent to $2.72 on Nasdaq. Alpha Natural Resources ANR.N fell 5.2 percent to $10.93 on the NYSE, Walter Energy WLT.N lost 5 percent at $48.81, Consol Energy (CNX.N) was down 3.2 percent at $29.15 and Arch Coal (ACI.N) slipped 3.1 percent to $7.08.
Even Peabody Energy (BTU.N), which mines mostly in the Illinois Basin and the Powder River Basin of Wyoming, fell 4.4 percent to $24.10.
Reporting By Steve James; Editing by Kenneth Barry