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Coal analysts say bankruptcy filing is ‘increasingly likely’ for Illinois Basin’s Foresight Energy

November 25, 2019

S&P Global Market Intelligence ($):

One of the few major U.S. coal companies to dodge the bankruptcy court may soon need to file for Chapter 11 restructuring if the current market and economic forces working against the coal industry persist, according to recent securities filings.

Over the past few weeks, Foresight Energy LP exercised an option to delay a $24.4 million interest payment and negotiated the right to skip a publicly accessible quarterly call to discuss its third-quarter finances. As management of the Illinois Basin coal miner management works to restructure its balance sheet, the New York Stock Exchange delisted its stock and Foresight affiliate Murray Energy Corp. filed for a bankruptcy reorganization.

“With a significant debt load and a near-term pricing recovery increasingly unlikely, a Chapter 11 bankruptcy filing appears increasingly likely,” B. Riley FBR analyst Lucas Pipes wrote in a Nov. 14 note.

While some coal companies struggled to sell assets even through bankruptcy auctions, Pipes noted that Foresight still owns some attractive mining assets, with its longwall mines capable of producing coal at a lower cost than its peers. However, the company has about $1.25 billion in gross debt on its balance sheet.

“The partnership continues to engage in discussions with its creditor constituencies and is exploring potential restructuring alternatives,” Foresight wrote in a Nov. 12 securities filing. “As a result of these discussions and potential restructuring efforts, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or our creditors, under certain circumstances, could force us into an involuntary bankruptcy or liquidation.”

Illinois Basin producers turned to a recent boom in export markets to make up for a decline in domestic demand, but that demand is retrenching. In the third quarter of 2018, Foresight captured $140.8 million in international coal sales. In the third quarter of 2019, it reported $34.8 million from export markets, a 75.3% decline. Domestic sales fell from $151.2 million to $146.7 million in the same period. 

More ($): Weakening coal market conditions move Foresight to shakier ground

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