Alpha Natural Resources Can Most Likely Survive, But Can It Thrive?
Stephen Simpson, CFA • 10 Comments
Stephen Simpson, CFA • 10 Comments
Going Over Alpha Natural Resources
Paulo Santos • 42 Comments
Paulo Santos • 42 Comments
Jul. 30, 2015, 4:06 PM
- Alpha Natural Resources (NYSE:ANR) plans to file for Chapter 11 bankruptcy as soon as Monday, Bloomberg reports.
- ANR’s senior lenders including Citigroup and Davidson Kempner Capital Management reportedly plan to provide a loan to fund the company through bankruptcy.
- ANR would not repay $109M of 3.25% convertible notes by an Aug. 1 maturity date, according to the report.
Jul. 22, 2015, 11:34 AM
- J.P. Morgan finally gets around to downgrading Peabody Energy (BTU +11.7%), cutting its rating to Neutral from Overweight, two days after shares hit a 52-week low.
- After Arch Coal ([ACI]] +1.1%) and Alpha Natural’s (ANR +8.1%) share prices fell below $1, the spotlight fell on BTU, the firm explains, adding that the stock is vulnerable to squeezes, as 36% of BTU equity is now shorted; but in view of the firm's cautious commodity view on natural gas into year's end, it says it is "uncomfortable" with its Overweight rating on BTU.
- JPM says its coal Overweights are now restricted to Alliance Resource Partners (ARLP -1.9%) and Foresight Energy (FELP +2.1%).
Jul. 21, 2015, 3:14 PM
- Alarm bells are ringing for Joy Global (JOY -2.2%) and its ability to weather a capital spending slump among miners that include some of the company's biggest customers, J.P. Morgan analysts say.
- A combined 60% of JOY’s trailing 12-month sales were to North American and Latin American customers, many of which are coming under increasing financial pressure, which prompts the analysts to expect JOY’s earnings and balance sheet to come under pressure into FY 2016.
- JPM sees some of JOY's five biggest customers - ANR, SID, CLF, CMP and VALE - needing to further reduce capex, as well as push out receivables, off-load inventories to suppliers and in-source maintenance labor (~20% of JOY’s service business).
Jul. 20, 2015, 12:59 PM
- Alpha Natural Resources (ANR -21%) is downgraded to Neutral from Buy at Sterne Agee CRT - odd timing, since the coal miner has lost more than 85% of its value YTD and now trades at less than $0.10/share.
- While ANR indicated total liquidity of $1.8B as of March 31 and continues to explore options for capital structure improvement, the firm believes investor focus will shift toward distressed credit and legal news flow.
- The NYSE said last week that it will begin de-listing proceedings, and recent reports say ANR has entered into discussions with various parties regarding the potential of a bankruptcy filing.
Jul. 15, 2015, 5:26 PM
- Alpha Natural Resources (NYSE:ANR) is in talks to obtain financing for a potential bankruptcy filing early next month, WSJ reports.
- ANR reportedly is negotiating the terms of a $300M-$400M debtor-in-possession loan with its loan holders and senior bondholders,which would help see it through bankruptcy should it file for chapter 11 protection in early August, near the time some of its convertible bonds come due.
- ANR is still exploring options to improve its capital structure, and a bankruptcy filing is not inevitable, the report says.
- ANR -32.8% AH.
Jul. 14, 2015, 3:43 PM
- Challenging results should be expected across the spectrum of coal producers, including Peabody Energy (BTU -3.3%), Cloud Peak Energy (CLD -1.5%), Alpha Natural Resources (ANR +0.6%) and Arch Coal (ACI +5.1%), Cowen analysts maintain, seeing average Q2 EBITDA estimates for the group ~4% below consensus.
- Among the coal names, Cowen says it is farthest below consensus for ACI (13% below consensus) and ANR (27% below consensus); amid deteriorating financial conditions, self-bonding capacity has become a hot topic for these companies and will be at the forefront of Q2 earnings calls.
- Cowen considers Alliance Resource Partners (ARLP +0.2%) its top pick and believes the company's White Oak transaction solidifies distribution growth potential; the firm rates ARLP, ACI and Foresight Energy (FELP -2.3%) at Outperform, and Natural Resource Partners (NRP -1.3%) and Teck Resources (TCK -0.2%) at Market Perform.
Jun. 30, 2015, 1:50 PM
- Alpha Natural Resources' (ANR -3.2%) creditors have hired advisers to prepare for possible restructuring talks ahead of an August debt payment, WSJ reports.
- Creditors reportedly expect restructuring talks to heat up ahead of the Aug. 1 repayment deadline for some of ANR’s convertible bonds; the company has been buying back the notes, but $109M worth remained outstanding as of March 31.
Jun. 30, 2015, 11:25 AM
- Coal companies (KOL -0.8%) are surrendering much of the gains they enjoyed following yesterday's Supreme Court decision against the EPA's mercury emissions regulations, as the initial reaction may prove rosier than the actual benefit to the coal industry.
- The consensus is that the ruling might force the EPA to be less aggressive about its efforts to cut pollution but will not help coal overcome competition from gas and alternative energy; also, the oversupply of natural gas likely will continue to depress the price of gas and reduce coal sales.
- The ruling could prove too late to provide a reprieve for most of the utilities that already had spent the resources to retrofit or retire, Sterne Agee analysts say, but lower MATS compliance operating costs could help some PRB coal power plants compete more aggressively on the margin with gas-fired power plants.
- Citigroup notes the news has important implications for the Clean Power Plan proposal scheduled to be finalized mid-summer 2015, and views the ruling as a net positive for the U.S. thermal coal market and miners such as Peabody Energy (BTU -11.3%), Alliance Resource Partners (ARLP +1.5%),Alliance Holdings (AHGP -0.1%) and Foresight Energy (FELP +0.1%).
- Also: ACI -4.7%, ANR -6.9%, CLD -7%, WLB -2.9%, WLT -12.9%.
Jun. 29, 2015, 11:38 AM
- Coal stocks (KOL +0.3%) are rallying after the Supreme Court threw out the EPA’s first-ever rules requiring coal-fired power plants to cut emissions of mercury and other toxic air pollutants, saying the agency should have weighed the cost of compliance in deciding whether to regulate.
- The ruling means the EPA must go back to the drawing board, which possibly could push any new emissions rules past Pres. Obama’s time in office.
- Coal companies are enjoying hefty gains: WLT +28.2%, ACI +15.1%, BTU +11.2%, ANR +5.4%, CLD +5.2%, RNO +3.9%, WLB +1.9%, CNX +1.4%.
- Select utility names also are seeing some strength: AEP +1%, PCG +0.9%, D +0.6%, NEE +0.6%, EXC +0.3%.
Jun. 26, 2015, 11:38 AM
- Peabody Energy (BTU -10.2%) sees continued weakness, down ~10% so far today and 20% on the week, although all coal mining shares (KOL -1.5%) have been hammered in recent days.
- Moody's downgraded BTU's corporate credit rating last night to B3 from B2 with a negative outlook, reflecting the rating agency's expectation of a more precipitous deterioration in the company's credit metrics than previously forecast due to the ongoing decline in the seaborne met coal markets.
- The firm sees BTU's debt/EBITDA ratio approaching 9x in 2015 and leverage remaining elevated at ~7x in 2016; absent asset sales, BTU is seen generating negative free cash flows in 2015 and 2016.
- However, BTU and other coal names have been sliding all week; Barron's Ben Levisohn speculates investors may be worried about the pending Supreme Court decision - in light of the Court's "having tilted leftward in its rulings" this week - on whether EPA rules that caused utilities to shutter some coal-fired plans are legal.
- Related tickers: ACI, WLB, CLD, ANR, WLT, CNX, NRP.
Jun. 24, 2015, 2:50 PM
- A bill to require California's state pension funds to sell their investments in companies that generate at least half their revenue from coal mining has passed a committee vote in the state Assembly.
- Calpers says it invests in 20-30 thermal coal mining companies as defined under the bill, valued at $100M-$200M, including Peabody Energy and Arch Coal; Calstrs has coal holdings of ~$40M.
- Pension funds are under pressure from environmental activists to halt investing in fossil fuels; Norway's parliament voted recently to cut coal investments by its $880B sovereign wealth fund, while some U.S. universities have made similar moves.
- Coal stocks already were trading lower before the news: BTU -10.1%, ACI -9.4%, ANR -7.4%, WLB -2.7%, CNX -1.8%, KOL -0.4%.
Jun. 12, 2015, 3:11 PM
- Peabody Energy (BTU -8.1%) and Arch Coal (ACI -12.3%) plunge to all-time intraday lows amid concerns that they will have to pay more for insurance that covers environmental damage.
- "Investors don’t know how to handicap this self-bonding issue,” says Doyle Trading CEO Ted O’Brien. "Until the companies come out and give Wall Street certainty that they know how to deal with it, I think we’re going to be stuck in this vortex."
- Wyoming regulators have told Alpha Natural Resources (ANR -10.6%) that it no longer qualifies for a self-bonding program which allows coal producers to cheaply insure their clean-up costs in case of bankruptcy, and are reviewing financial data from BTU and ACI to see if they still qualify.
- Two other coal miners, Cloud Peak Energy (CLD -6.7%) and Walter Energy (WLT -8.2%), also have sunk to record intraday lows.
- ETF: KOL
Jun. 10, 2015, 2:45 PM
- U.S. coal companies worried about the Obama administration’s proposed clean air rules actually face a bigger threat: cheap, abundant natural gas, which is crushing coal prices with no letup in sight, according to a Bloomberg report.
- Shale formations in the eastern U.S. are yielding record amounts of gas, pushing prices of the fuel in the region below coal, which already had been 60% less expensive on average since 2001; as power generators use more gas, coal is piling up at the fastest rate since 2009.
- U.S. utilities are on track to end 2015 with 171M tons of coal in reserve, the highest since 2012, says a BB&T analyst - “It’s going to be ugly,” says Doyle Trading's Hans Daniels. “When stocks build up like that, it just defers the pain for the coal companies.”
- Most coal names are sharply lower: BTU -2.1%, ANR -9.7%, ACI -8.4%, CLD +0.9%, WLB -1.9%, CNX -1.1%, WLT -1.6%.
- ETFs: UNG, UGAZ, DGAZ, KOL, BOIL, GAZ, KOLD, UNL, DCNG
Jun. 8, 2015, 11:48 AM
- Walter Energy (WLT -30.8%) plunges in reaction to a report late Friday that it is working with its lenders to finalize plans for filing for Chapter 11 bankruptcy, and share prices of other coal producers also are lower.
- Cowen analysts say a WLT bankruptcy filing was widely expected but more are likely to come as companies evaluate their options; some may be able to steer clear of bankruptcy but will exit the downturn shackled by major debt service and competing with others that reorganize and exit the downturn leaner and meaner, the firm says.
- Also: BTU -0.9%, ACI -1.9%, ANR -0.6%, CLD -1.2%.
Jun. 3, 2015, 11:59 AM
- Short sellers have noted coal’s recent struggles, as U.S. coal firms had an average of 3.5% of shares out on loan 18 months ago but rose to a high of 7.5% in the opening week of April.
- Markit says short interest in the sector is now somewhat off its recent highs, with Alpha Natural Resources (ANR -0.7%) and Arch Coal (ACI -0.3%) both seeing covering in the last month; both firms are down by more than a third in the last month and short sellers appear to be taking some of the profits from their trades.
- Markit says the covering in ACI and ANR has coincided with an increase in demand to borrow shares in Peabody Energy (BTU -7.5%), Cloud Peak Energy (CLD -2.6%) and Westmoreland Coal (WLB +1.2%), which could represent a shift in the sector’s short positions.
Jun. 1, 2015, 3:24 PM
- Peabody Energy (BTU -9%) and Cloud Peak Energy (CLD -9.3%) are sharply lower after Goldman Sachs recommends investors sell shares, seeing BTU as something of a proxy for its bearish view on met coal prices - which the firm expects to remain pressured through 2017 - and CLD as a pure-play exposure to Powder River Basin thermal coal.
- However, the firm sees "idiosyncratic opportunities" for substantial gains in the coal sector, identifying Illinois Basin thermal coal as the one thermal coal segment where fundamentals are not negative and naming Foresight Energy (FELP +3.5%) a Buy for its pure-play exposure to the IB and attractive drop-down potential following the recent Murray Energy transaction.
- Goldman also maintains its Buy rating on SunCoke Energy (SXC -1.2%) given low-cost, organic growth from dropdowns, a strong balance sheet that improves prospects of inorganic growth and attractive valuation.
- The firm also maintains its Neutral rating on Arch Coal (ACI +2.8%) while upgrading Alpha Natural Resources (ANR +2.6%) to Neutral from Sell.
Sector: Basic Materials
Industry: Nonmetallic Mineral Mining
Country: United States
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