Walter Starts $450M Notes Offering - Analyst Blog

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Walter Energy Inc. ( WLT ) 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. ( AHGP ) and Zacks Ranked #2 (Buy) Alliance Resource Partners L.P. ( ARLP ) as well as SunCoke Energy Inc. ( SXC ).



ALLIANCE HLDGS (AHGP): Free Stock Analysis Report

ALLIANCE RES (ARLP): Free Stock Analysis Report

SUNCOKE ENERGY (SXC): Free Stock Analysis Report

WALTER ENERGY (WLT): Free Stock Analysis Report

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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 , ARLP , SXC , WLT

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