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Alpha Natural Resources Files for Bankruptcy

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Alpha Natural Resources

Alpha Natural Resources (ANRZ) filed for bankruptcy on Monday, August 3, 2015, as we expected. We had raised the red flag on the company on various occasions in our analysis. In our series Industry Overview: The shifting sands of US coal production published in October 2014, we highlighted the inherent risks that may push the company to bankruptcy.

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Coal ETF gains

While talks of the imminent bankruptcy of Alpha Natural Resources (ANRZ) grew louder last week, the VanEck Vectors Coal ETF (KOL) outperformed the broader market. The VanEck Vectors Coal ETF (KOL) gained 1.9% during the week ended July 31, surpassing the SPDR S&P 500 ETF’s (SPY) 1.2%. Of KOL’s holdings, 30% are invested in US coal producers.

The gainers

Westmoreland Coal Company (WLB) was the biggest gainer in the sector for the week ended July 31. The company gained 13% to end the week at $15.59 with a market capitalization of $280.1 million. The company reported higher adjusted EBITDA and lower net losses in 2Q15. However, the highlight of the week was a letter that the company’s CEO posted on its website, alleviating investor concerns. Although the company has a sound business model, the stock has been on a downturn due to industrywide concerns.

Two coal MLPs, Natural Resource Partners (NRP) and Alliance Resource Partners (ARLP), gained 9.9% and 6.0%, respectively. NRP and ARLP declared $0.09 and $0.68 in their quarterly distributions, respectively. At the current prices, both these stocks offer an attractive dividend yield.

All other coal producers lost during the week.

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