Coal stocks are tumbling today, as Walter Energy (WLT) sold a boatload of debt, and Bank of America Merrill Lynch predicted lower coal prices.
Greg Kahn / GRAIN Shares of Walter Energy have dropped 17% to $7.54 at 1:$1 p.m. today, Peabody Energy (BTU) has fallen 1.4% to $15.52, Alpha Natural Resources (ANR) has declined 3.2% to $4.31 and Arch Coal (ACI) is off 1.2% at $43.0.
Walter Energy announced that it would sell $200 million of senior secured notes due 2019 with a coupon of 9.500% a year, and priced its private offering of $350 million aggregate principal amount of 11.0%/12.0% Senior Secured Second Lien PIK Toggle Notes due 2020. Walter has a debt-equity ratio of 369, according to Bloomberg, more than twice Peabody Energy’s 152. Walter’s announcement comes just two days after James River Coal (JRCC) missed a coupon payment on its own debt. Standard & Poor’s reaffirmed Walter Energy’s B-minus rating yesterday but said the outlook is negative.
Bloomberg has the details on Merrill Lynch’s coal forecast:
Walter Energy Inc. and other U.S. producers of metallurgical coal slumped after Bank of America Corp. said supply and demand fundamentals for the commodity will be "depressed" for the next several years…
Benchmark contract prices for metallurgical coal, which is used to make steel, are at $143 a ton in the first quarter, the lowest since 2010. Quarterly prices will be in a range of $130 to $150 a ton in the next several years, Timna Tanners, a New York-based analyst at Bank of America, said today in a note.
Shares of Walter Energy have plunged 55% so far this year, while Peabody Energy has fallen 21%, Alpha Natural Resources has declined 40% and Arch Coal has dipped 3.2%.
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