Peabody Energy CorporationBTU announced that it will issue $1.0 billion aggregate principal amount senior secured second lien notes due in 2022 in a private placement to eligible purchasers subject to prevailing market conditions.
The company intends to utilize the net proceeds to fund its tender offer to purchase for cash any and all of the $650 million aggregate principal amount outstanding 7 3/8% Senior Notes due 2016 (the "2016 notes"), to fund the redemption or satisfaction and discharge of all 2016 notes that are not tendered in the tender offer. The remaining proceeds will be used for general corporate purposes, which may include the payment of its federal coal lease expenditures.
Though the new debts will undoubtedly increase the company's debt burden, it will give Peabody an opportunity to keep its funds invested in the business for a longer period. Peabody exited 2014 with long-term debt of $5.96 billion, flat with the prior-year level.
The financial performance of this premier coal company in the fourth quarter 2014 was affected by a supply glut in the global market. Loss per share in the reported quarter was much wider than the Zacks Consensus Estimate. The bottom line was negatively impacted by lower sales volume and realized prices.
We do not expect the hard times to be over for Peabody soon, but we appreciate the initiatives, particularly the cost cuts, taken by the company to cope with the current situation.
We expect Peabody's presence in two coal-rich basins in the U.S. and its Australian platform to provide it with an added competitive edge as against its solely North America based peers.
Peabody Energy currently has a Zacks Rank #3 (Hold). A better-placed operator in the space is Hallador Energy Co.HNRG , which currently sports a Zacks Rank #1 (Strong Buy).