Alpha Natural Resources: Debt profile
Because of the currently weak market conditions, most American coal producers are burning cash. They’re trying to conserve liquidity through various means to make sure they survive the downturn. This is especially true for highly leveraged players because they have limited ability to issue new debt if they run out of resources.
Alpha Natural Resources (ANR) is one of these players. ANR had around $3.3 billion of debt on its books as of March 31, 2015. The company repurchased $593 million worth of unsecured notes using $117 million in cash and $214 million in fresh debt, reducing the debt on the books by $379 million. This transaction is expected to help ANR save $21 million in annual interest costs.
ANR’s cash and cash equivalents dropped to $476.3 million as of March 31, 2015, down from $741.2 million as of December 31, 2014. The cash burn as well as the repurchase transaction are responsible for the drop. The company holds another $552.8 million in investments. As of March 31, 2015, the company had total liquidity of $1.9 billion, including $821 million in available credit lines.
Other coal producers (KOL), especially highly leveraged producers such as Arch Coal (ACI), Peabody Energy (BTU), and Walter Energy (WLT), have also shored up substantial liquidity to survive the downturn. Companies such as Cloud Peak Energy (CLD) and Westmoreland Coal (WLB), which refrained from aggressive acquisitions, enjoy cleaner balance sheets.
The energy sector accounts for 7.1% of the iShares Russell 3000 ETF (IWV).