Tuesday, June 24, 2014

"High Yield" Coal Bonds

Coal has had some rough times because of competition from cheap natural gas the past few years. Some of the coal companies have had negative income and even operating profit for multiple years in a row.

You'd think maybe there's be some distressed debt opportunities, but the bonds are extremely expensive.

  • Alpha Natural Resources - mines coal in VA, WV, KY (higher cost) in addition to WY. EBIT less than interest expense the past three years. Highest yielding bond 13%.
  • Armstrong Energy - Illinois basin coal (better), but operating income hasn't covered interest expense  since 2009, yet bond only yields 8.7%.
  • Peabody (BTU) - good coal but highest yielding bond less than 7%.
  • CLD - Powder River Basin (good coal), but highest yielding bond only 5.6%. Is profitable and covering interest expense though.
  • Consol - highest yielding debt 5.5%.
  • Westmoreland - yielding about 5%
This is probably the type of debt that yield hunger funds have shorted the long bond to buy.

1 comment:

theyenguy said...

Today, Junk Bonds, JNK, traded to a new all time high as Aggregate Credit, AGG, was led higher by the 30 Year US Government Bonds, EDV, the 10 Year US Notes, TLT, and the Long Duration Corporate Bonds, LWC.

An inquiring mind asks will inverse bond ETFs such as SAGG, HYND, and AGND, preserve one’s wealth, which can seen in their ongoing combined Yahoo Finance Chart?

Perhaps, but they are dollar based fiat wealth, and will not participate in the increase in wealth that comes from the demand for safe haven hard assets, such as the physical possession of gold bullion