Peabody Energy Corporation (BTU) has extended exchange offers for its two series of senior notes, totaling $2,858.4 million in aggregate principal amount. Under this transaction, the company will offer to exchange $1,518.8 million aggregate principal amount of 6.00% senior notes due in 2018 and $1,339.6 million aggregate principal amount of 6.25% senior notes due in 2021. These offerings will close on October 16, 2012.
As per the recommendation, Peabody can be tendered to the exchange agent, U.S. Bank National Association, by the holders for $1,515.5 million in aggregate principal amount or 99.78% of outstanding unregistered 2018 senior notes of $1,518.8 million and $1,338.6 million in aggregate principal amount or 99.93% of outstanding unregistered 2021 senior notes of $1,339.6 million.
This present senior note issuance is the extended part of an offering made by Peabody on November 7, 2011. The company exercised public offering of two series of senior notes aggregating $3.1 billion – $1.6 billion of 6% senior notes due in 2018 and $1.5 billion of 6.25% senior notes due in 2021.
Later, the company repurchased $81.2 million aggregate principal amount of 6.00% senior notes due in 2018 and $160.4 million aggregate principal amount of 6.25% senior notes due in 2021.
Currently, Peabody has $1,518.8 million aggregate principal amount of 2018 outstanding senior notes and $1,339.6 million aggregate principal amount of 2021 outstanding senior notes.
The company utilized a portion of the proceeds from its earlier issuance of senior notes offering to fund the Macarthur Coal acquisition and related fees and expenses. The remaining part was used to repay a portion or all of any borrowings associated with the acquisition or for general corporate purposes.
It is evident from last few offerings that Peabody issues senior notes and bonds from time to time to accumulate funds for repaying its existing debts and for its organic as well as inorganic expansion projects. As of June 30, 2012, the company’s long-term debt was $6.27 billion compared with $6.56 billion as of December 31, 2011. The debt level dipped as the company repurchased bonds worth $240 million during second-quarter 2012.
The company is expected to release its third-quarter 2012 results on October 22, 2012. The Zacks Consensus Estimates for third-quarter 2012 and full-year 2012 are currently pegged at 34 cents and $1.78 per share, respectively.
We believe that slow recovery of the U.S. economy and the lower gas prices are challenging the coal demand in the domestic market. In the international arena, coal demand was negatively impacted due to the planned production slow down in the manufacturing sector and lower electricity generation. These factors primarily tempted Peabody to slash its 2012 capital expenditure budget by $200 million to $1.0 billion.
Peabody Energy Corporation currently has short-term Zacks #5 Rank (Strong Sell rating).
St. Louis, Missouri-based Peabody Energy Corporation is the world’s largest private sector coal mining company and a global leader in clean coal solutions. The company owns majority interests in 29 mines in the U.S. and Australia. With a market capitalization of $7.20 billion, Peabody has 8,300 full time employees. The company’s closest peer is CONSOL Energy Inc. (CNX).
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