Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Peabody Energy Corporation (BTU), Arch Coal Inc (ACI), Alpha Natural Resources, Inc. (ANR): Possible Debt Refinancing Is Good for This Coal

Falling coal prices have hit coal miners with a lot of debt on their balance sheets. Peabody Energy Corporation (NYSE:BTU) is not an exception. The company has $6 billion in long-term debt. As coal prices do not show signs of a serious rebound, refinancing the debt becomes a tempting target. Peabody Energy Corporation (NYSE:BTU) is rumored to be seeking refinancing of its $1.2 billion term loan.

At the beginning of this summer, another coal miner, Walter Energy, announced that it was trying to refinance $1.55 billion of its debt. The company gave up these efforts just a week after the announcement. Will Peabody Energy Corporation (NYSE:BTU) share the same fate?

Peabody Energy Corporation (NYSE:BTU)Guidance reaffirmed
Peabody Energy Corporation (NYSE:BTU) recently reaffirmed its full year 2013 guidance. The company expects to sell 230 million–250 million tons of coal. If Peabody could make it to the high end of the guidance, it would replicate the previous years’ results. It sold 248.5 million tons of coal in 2012 and 249.4 million tons of coal in 2011.

It would not be the easiest thing to do. Coal’s share in energy consumption has fallen from 18.3% in 2012 to 17.5% in the first five months of 2013. Natural gas prices remain low, providing an attractive alternative to coal.

Other suppliers of steam coal were not as reassuring as Peabody Energy Corporation (NYSE:BTU). Arch Coal Inc (NYSE:ACI) guided that it would sell 130 million – 137 million tons of steam coal in 2013, down from 140.8 million tons in 2012. Alpha Natural Resources, Inc. (NYSE:ANR) lowered its guidance in the second quarter report and now expects to ship 64 million – 70 million tons of steam coal this year, down from 88.5 million in the previous year.

Debt burden
Interest payments put a serious burden on coal miners’ earnings. Peabody Energy Corporation (NYSE:BTU) had to pay $110.8 million in interest in the second quarter of this year. The company had just $26.4 million of operating profit, and only $184.7 million of income tax benefit helped Peabody finish the quarter with a profit.

Peabody expects to finish the year with earnings of -$0.16-$0.09 per share. Analysts are more optimistic, predicting earnings of $0.14 per share. So far, the company has earned $0.24 per share. It means that both the company and analysts are expecting that Peabody will finish the second half of this year with a loss. It also means that they do not expect coal prices to rebound soon.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.