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?

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.