UBS sees no imminent bankruptcy risk in coals but likely down the road

UBS analyst Kuni Chen thinks it makes more sense to start thinking about bankruptcy in the coal sector two or three years down the road rather than buy-the-dip opportunities, noting that the bonds of Walter Energy (WLT), Alpha Natural Resources (ANR) and Arch Coal (ACI) are edging close to distressed levels.

Some tranches of WLT debt are trading at $0.60 on the dollar, while ANR and ACI paper trade a bit better at 70-80 for unsecured debt with yields approaching the mid-teen percentages; the equities continue to be weak, with WLT down almost 70% in the last 12 months and ANR down 40%.

Chen also thinks it makes sense for Peabody Energy (BTU) to sell more stock to pay down its $6B debt load, since it would provide added flexibility to weather the downturn in the seaborne coal markets should prices stay at depressed levels for a longer than expected period of time.

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Comments (11)
  • nemonemo
    , contributor
    Comments (338) | Send Message
    What a bunch of morons. Kuni Chen should go back to China. China needs that moron.
    27 May 2014, 06:13 PM Reply Like
  • King Rat
    , contributor
    Comments (1727) | Send Message
    He was born in the States. Why don't you go play with your other clown fish friends and leave these boards to non-racists.
    28 May 2014, 03:23 AM Reply Like
  • nemonemo
    , contributor
    Comments (338) | Send Message
    Ok rat.
    28 May 2014, 03:46 AM Reply Like
  • wil3714
    , contributor
    Comments (2330) | Send Message
    lol racist
    29 May 2014, 02:53 AM Reply Like
  • papayamon
    , contributor
    Comments (1347) | Send Message
    most of the coal companies are priced like they are going bankrupt already.
    27 May 2014, 07:37 PM Reply Like
  • freeman8201
    , contributor
    Comments (827) | Send Message
    LOng arch coal!!! Last I checked it owes ~$1billion within 5 years. yes I know they have a much larger debt load than 1B. I believe they're refinancing 600M of it.
    27 May 2014, 07:53 PM Reply Like
  • Troiano1691
    , contributor
    Comments (5) | Send Message
    Given war jitters from China's bullying of Japan, Vietnam and the Philippines and Russia's accumulation of ports in Syria, Egypt, and Crimea, ship upgrading by all nations mentioned as well as others, e.g. Nato and U.S. will pick-up. When added to planned infrastructure projects in China, India, South America and the Mid-east, Met-coal will rebound. WLT is almost a total Met-coal company and if they can hang-in with smart refinancing until the backlog lowers, they can make it.
    27 May 2014, 08:21 PM Reply Like
  • a alto
    , contributor
    Comments (356) | Send Message
    Used to long them ,but quit when a friend who works at a coal fired plant informed me his companies were building new gas fired plants .That gentlemen is the big hurt for coal . Love coal ,I'm from coal country , but will only short them as an investor
    28 May 2014, 07:21 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
    Steam coal will never be the same if the gas revolution continues to spread, Met coal though will be needed so keep watching for that to turn around.
    28 May 2014, 08:30 AM Reply Like
  • edmundjr
    , contributor
    Comments (23) | Send Message
    More Coal will be needed as world expansion continues. Sector is oversold and weak hands are out. When this reverses the increases in Stock will be incredible.
    28 May 2014, 12:47 PM Reply Like
  • mystical44
    , contributor
    Comments (36) | Send Message
    This reminds me of the financial sector in 08-09.. everyone screaming abandon ship..


    Those with a contrary mindset think "A. people need banks, B. identify which banks have been bashed the most and least likely to go bk, C. Buy those banks"


    Other than NBG, i have since made a KILLING on BAC ($5), JPM ($20's), and IRE ($5). Ford was another gem when it was thrown out with the bathwater...


    The world needs coal as well and my cycle repeats....patience


    as we all know what Warren B. says in these times......
    28 May 2014, 02:14 PM Reply Like
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