Photo by: Bloomberg
TORONTO (miningweekly.com) – Floundering US coal company Walter Energy on Thursday deferred debt interest payments on another set of senior notes, potentially raising the spectre of staring down bankruptcy in the near future.
The NYSE- and TSX-listed company announced that it would exercise the 30-day grace period under its indenture agreement with holders of its 9.875% senior notes due in 2020, extending the timeframe for making the $19-million cash interest payment due on Monday.
The Birmingham-based coal miner in April exercised a similar 30-day grace period under its indenture agreements with holders of its 9.5% senior secured notes due in 2019 and the 8.5% senior notes due in 2021.
However, ratings agency Standard & Poor’s (S&P's) had earlier this week lifted the company’s corporate credit rating to CCC-, up from D, citing Walter Energy's repayment of $62-million in total interest payments on its 2019 and 2021 senior notes.
S&P's noted that Walter Energy had an unsustainable debt level that could trigger a default event unless its debt was restructured in the next six months.
Walter Energy had not generated an annual profit since 2011. Last year, Walter Energy idled its Canadian operations in the second quarter and, early this year, the cash-strapped miner suspended its quarterly dividend on its common stock in an effort to enhance its financial flexibility in the current turbulent metallurgical (met) coal market conditions.
The company said it would continue to deliver high-quality met coal to customers and continue to meet its other obligations as it worked with its debtholders to establish a capital structure that would better position the company to weather the competitive and challenging market.
S&P's retained a negative outlook, reflecting expectations that weak met coal market conditions would persist over the next 12 months.
Coal miners across the globe had been dealing with stubbornly low coal prices, a global supply glut and competition from cheap natural gas, which had forced cash-strapped miners to idle unprofitable mines and retrench thousands of miners. In the US, increasingly strict environmental legislation also had a stranglehold on the thermal coal industry’s growth prospects.
Walter Energy also stood to lose its NYSE listing after the exchange notified the ailing company last month that its common stock did not satisfy one of the exchange's continued listing standards. The NYSE required the average closing price a share of a listed company's common stock to be at least $1 over a consecutive 30-day trading period.
After a precipitous 39% fall in 30 days, Walter Energy’s stock on Thursday morning changed hands at $0.32 apiece on the NYSE, having hit a 52-week high of $8.04 a share.