Walter Energy Inc.
) yesterday announced that it has increased its 9.5% senior
secured notes offering, due 2019, to $450 million. Earlier in the
day, the company announced the commencement of senior notes
offering worth $350 million.
The company intends to utilize the net proceeds to buy back up
to $250 million of its Term Loan A through a Dutch auction
process and the balance for general corporate purposes.
The interest on the notes will be paid on Apr 15 and Oct 15
every year, starting Apr 15, 2014. If Walter Energy does not
entirely subscribe to the proposed Dutch auction, it will use the
unused part of the $250 million to recuperate Term Loan A and
Term Loan B on a pro rata basis.
Credit rating agency Moody's assigned a B3 rating to Walter
Energy's latest notes offering and also lowered the company's
current senior secured ratings to B3 from B2 on account of its
rising debt level. This reflects Walter Energy's current
obligation is speculative grade and is subject to a high credit
risk. As of Jun 30, 2013, Walter Energy's long-term debt was
$2.59 billion, up 8% from $2.40 billion as of Dec 31, 2012.
In addition, Walter Energy is already experiencing higher
interest expenses on its long-term debt, which at the end of the
second quarter increased 70.7% from the comparable year-ago
level. The current notes issuance will further add to the
company's debt burden.
In light of the coal market challenges, the company has
significantly cut down its capital expenditure as well as kept a
check on its costs. These efforts will ensure stable returns in
the coming quarters. Also, the metallurgical coal market is
expected to make a comeback in the coming years with bullish
steel demand driving Walter Energy's future prospects.
Currently, Walter Energy retains a Zacks Rank #3 (Hold). Other
coal operators looking good are Zacks Ranked #1 (Strong Buy)
Alliance Holdings GP, L.P.
) and Zacks Ranked #2 (Buy)
Alliance Resource Partners L.P.
) as well as
SunCoke Energy Inc.
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WALTER ENERGY (WLT): Free Stock Analysis
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