July 30, 2018 Read More →

As Murray Energy skirts bankruptcy, CEO says investors need not fret

S&P Global Intelligence ($):

Murray Energy Corp. will continue to deliver its businesses to weather the impact of shrunken domestic coal demand and has mitigated the potential consequences of a subsidiary’s bankruptcy by finding new customers, Chairman, CEO and President Robert Murray said.

He also told S&P Global Market Intelligence that Murray Energy, along with its affiliates and subsidiaries, is reaping the benefits of seaborne demand for U.S. coal and will increase sales into the export market to 22.5 million tons this year.

Murray Energy, the largest privately owned coal company in the U.S, is one of the few in the sector to dodge a court restructuring, winning over creditors with a distressed debt exchange aimed at buying the company some time to wait for improved market conditions. Offering up additional collateral and a higher interest rate as a sweetener, the company recently extended the maturities on a large swath of debt coming due in 2020 and 2021 in a move Murray said is evidence of the company executing a strategy to stay out of bankruptcy.

“With the additional collateral value and cash flow from the newly pledged assets, our investors are well-protected.”

The company’s refinancing, deemed by some including Moody’s as a limited default on behalf of Murray Energy, extended the maturity date on 95% of $1.8 billion of outstanding term loans from 2020 to 2022 and swapped roughly 71% of the $996 million that remained on its 11.25% second-lien bonds due 2021 for new 12% payment-in-kind notes maturing in 2024.

Out-of-court debt restructurings can provide a company with runway until operating or industry conditions approve, but often companies involved in a distressed exchange still end up filing for bankruptcy court protection. Moody’s conducted a 30-year study of default history and found that in 41% of cases, distressed exchanges failed to stave off either a bankruptcy or a subsequent round of distressed exchanges.

More ($): Murray Energy CEO says investors are ‘well-protected’ after refinancing

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