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Walter Energy Drops 17% on Possibility of Bankruptcy

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May. 7 2015, Updated 3:52 p.m. ET

Coal ETF Drops

The VanEck Vectors Coal ETF (KOL), which represents the global coal industry, dropped 1.3% on May 6 as American and global coal stocks fell. Stocks of US coal producers account for ~33% of the ETF’s total holdings. The broad-based SPDR S&P 500 ETF (SPY) dropped 0.4%.

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Walter Energy

Walter Energy (WLT) was the biggest casualty of the day in the coal sector, with a whopping 17% drop in share price to 38 cents. An update filed by the company with the Securities and Exchange Commission (or SEC) stated that the company asked for an extended timeline to make $62.4 million in interest payments.

Accordingly, if Walter Energy cannot make the payment by May 15 and is unable to restructure the debt, it may consider filing for Chapter 11 bankruptcy. The company published its 1Q15 earnings on May 5 and posted a loss of $80.2 million ($1.08 a share) during the quarter. We will cover the earnings in a separate series.

Other losers

Cloud Peak Energy (CLD) lost 10%, declining to $6.50 as the prices for the Powder River Basin continued southward. The Powder River Basin is the only region where Cloud Peak Energy operates.

Alpha Natural Resources (ANR) lost 8.2% as the stronger dollar and a glut in the seaborne market continued to weigh down on the stock. The stock ended the day at 75 cents, with a market capitalization of $166.7 million.

The Illinois Basin–based coal MLP (or master limited partnership) Alliance Resource Partners (ARLP) lost 3.6% to end the day at $32.60, with a market capitalization of $2.4 billion.

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