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Walter Energy, Inc. Common Stoc Message Board

  • joeltay16 joeltay16 Jun 16, 2013 2:47 AM Flag

    Facts about WLT loans - 2

    Based on my last writeup, we already know the liabilities position of WLT.
    At this point of time, BK is a remote possibility.

    When WLT pulled the refinancing, it was done because of the market condition. In this case, the condition is the tightening of interest rate (rate went up) since the Fed announced the possibility of taming the stimulus (bond-buying). As you are aware, it was the Fed monthly buying of the bonds that kept the interest rate low. Since Apr30 when Fed announced their intention, the rates had gone up. So it made no sense for WLT to refinance now when the benefit is not visible.

    It would have been a major problem if the refinancing was to get more money and they failed (WLT is not trying to do that), . But since this is not the case, the "bad" news was for the shorts to pound on that since this is perceived as such.
    Having said that, WLT's profitablity (and survival) depends on the coking coal prices. For Q2 so far, the prices are better than Q1 and they have made cost-cutting since Q1. So Q2 is possible for them to turn around and make a profit, or reduce losses. So no brainer Q2 is not a drag on EBITDA. But towards the end of Q2 (May 20++), prices had dropped from $176 to $140. But at the same time, assuming they made the 15% cost-cutting, WLT is expected to perform better in Q2 compared to Q1. The question is on Q3. If prices hold up, or even rises, then WLT would rebound.

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    • Their press release says they don't have any MATERIAL debt principal payments due until 2015 but they don't say the amount and exactly when in 2015. January 2015 or December 2015 and what are the debt covenants to that debt that may force them to pay sooner.

      The Company has no material debt principal payments due until 2015, and it requires no incremental funding at this time. The proposed refinancing would not have raised additional capital.

      • 1 Reply to theprincipal49
      • As you are aware, term loan A matures in Apr 2016. However, it is a term loan, and as such, WLT is required to make periodic payment to reduce the indebtness. Their obligations (from all the term loans) are 102M in 2013, 177M in 2014, 602M in 2015, 229M in 2016, 65M in 2017, and over 1B thereafter.

        As you can see, the bulk of their obligations is in 2015, and that is why WLT deemed it MATERIAL.
        For the next 1.5 years, they have the ability the service the loan (provided the prices hold up at this point, and they continue to reduce cash cost of production.

        Sentiment: Hold

    • Not remote as you don't know all the debt covenants that may change when they have to pya the principal.

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