Metallurgical coal producer Walter Energy Inc. (WLT) announced that it sold $320 million 9.5% senior secure notes due 2019 in a private offering. The company will utilize the net proceeds from the issue to repay $298.1 million of outstanding debt under its Revolving Credit Facility and to pay related fees and expenses.
The $320 million notes issued by Walter Energy followed the $450.0 million 9.5% senior secured notes due 2019 issued on Sep 27, 2013 and the $200.0 million 9.5% senior secured notes due 2019 issued on Mar 27, 2014.
The proceeds from the previous offerings were used to swap existing debts and for general corporate purposes.
Interest Payment
The interest payment of the new series of notes will be due on Apr 15 and Oct 15 of each year. The senior notes issued in 2014 will increase the company’s annual interest burden by $49.4 million. The current financial position of the company will allow it to meet the interest expenses.
Metallurgical Coal Market
Walter Energy is a metallurgical coal producer, so any improvement in met coal demand will also benefit the company. The World Steel Association forecasts a 3.1% increase in global steel usage in 2014. Any improvement in the steel market is expected to create fresh demand for met coal and improve the prospects of producers like Walter Energy and Alpha Natural Resources (ANR).
Zacks Rank
Walter Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the coal industry include Alliance Resource Partners LP (ARLP) and CONSOL Energy Inc. (CNX). Alliance Resource Partners carries a Zacks Rank #1 (Strong Buy) while CONSOL Energy holds a Zacks Rank #2 (Buy).
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