Alpha Natural Resources to Issue $400M Notes - Analyst Blog

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Coal producer Alpha Natural Resources ( ANR ) 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 shipment guidance.

Alpha Natural Resources currently carries a Zacks #3 Rank (Hold). Other better-ranked players in the coal industry include Alliance Holdings GP, L.P. ( AHGP ), China Shenhua Energy Co. Ltd. ( CSUAY ) and Alliance Resource Partners LP ( ARLP ). 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AHGP , ANR , ARLP , CSUAY

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