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Analyzing Alpha Natural Resources’ 2Q15 Balance Sheet Profile

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Jul. 30 2015, Updated 11:06 a.m. ET

2Q15 expectations

Alpha Natural Resources (ANRZ) hasn’t raised any new debt in 2Q15. As we discussed in the first part of this series, the Wall Street Journal reported that “Alpha Natural Resources (ANRZ) is in talks to obtain financing for potential bankruptcy filing early next month.” However, the debt will not show up on the balance sheet at the end of 2Q15. So ANRZ’s debt position is largely expected to remain in line with the 1Q15 level.

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1Q15 debt profile

ANRZ 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, $214 million in fresh debt, and remaining through stock. The total debt was dropped by around $380 million due to the repurchase. This transaction is expected to help ANRZ save $21 million in annual interest costs.

Liquidity position

ANRZ’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.

Coal producers (KOL) like Peabody Energy (BTU) and Arch Coal (ACI) have built large liquidity positions to survive the industry downturn. Meanwhile, Cloud Peak Energy (CLD) and Westmoreland Coal Company (WLB) boasted better balance sheets due to prudent financial management when others were splurging on ill-timed acquisitions.

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