Alpha Natural Resources
) announced that it will issue $400 million aggregate principal
amount of senior secured second lien notes due 2020 in a private
offering subject to market conditions.
The company intends to utilize a portion of the net proceeds to
fund purchases or repayments of outstanding debts with near-term
maturities. The remaining proceeds, if any, are intended for
general corporate purposes.
The long-term debt-to-capital ratio at the end of the first quarter
was 45.4%. Long-term debt, including the current portion of
long-term debt as of Mar 31, 2014 was nearly $3.4 billion while
interest expenses at the end of the first quarter were $64.9
million, up 9.4% year over year.
Second lien notes are expected to sport a higher rate of interest
compared to first lien notes. The higher interest rates give
investors a cushion against the high risk involved in these notes.
In Dec 2013, the company had issued $250 million Convertible Senior
Notes. The net proceeds from the issue were utilized for similar
purposes as this current issue.
Alpha Natural Resources' first quarter 2014 earnings of 7 cents per
share surpassed the Zacks Consensus Estimate of a loss of 58 cents
by a wide margin.
As per a recent World Steel Association report, global steel usage
is expected to increase 3.1% year over year in 2014. However, the
supply glut in global coal markets is putting downward pressure on
prices. To take into account the demand-supply imbalance, Alpha
Natural Resources made downward adjustments to its met coal
Alpha Natural Resources currently carries a Zacks #3 Rank (Hold).
Other better-ranked players in the coal industry include
Alliance Holdings GP, L.P.
China Shenhua Energy Co. Ltd.
Alliance Resource Partners LP
). While Alliance Holdings GP and China Shenhua Energy Co carry a
Zacks Rank #1 (Strong Buy), Alliance Resource Partners holds a
Zacks Rank #2 (Buy).
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