Moody’s Investors Service said it downgraded the ratings of Murray Energy, including its corporate family rating (CFR) to Caa1 from B3, probability of default rating (PDR) to Caa1-PD from B3-PD, first lien term loan rating to B2 from B1, and the rating on second lien senior secured notes to Caa2 from Caa1. The outlook is negative.

Moody’s said the downgrade reflects its expectation that the company’s cash flow generation will be under additional stress due to the recent cut in dividends by Foresight Energy GP. Murray holds 50% of Foresight’s limited partner units, and MLP distributions were expected to be a material contributor to cash generation prior to the announcement.

Effective November 2015, Foresight cut its quarterly cash distribution to $0.17 per unit for common unitholders from $0.35 to $0.38 over the previous four quarters, while suspending its distribution on all subordinated units, which are held by Murray. This dividend cut will result in Murray receiving no dividends for the quarter. If this dividend level by Foresight remains in place, it would result in no annual distributions to Murray, compared to our previous assumption of over $70 million.

Foresight cited the difficult business environment for coal for the cut including, but not limited to, oversupply in virtually all domestic and international basins, intense competition from natural gas, and soft domestic utility demand. It is unclear when dividend payout would return to prior levels.

Moody’s said the downgrade also reflects the recent deterioration in seaborne and domestic coal prices, which we expect to persist, putting pressure on average realizations over the next two years as higher priced contracts roll off. We expect that the company’s production volumes will also be under pressure over the next two years, due to the challenging industry conditions.