Thursday, September 25, 2014

"Walter Energy's bonds lose $363 million on coal woes" $WLT


"I don't think they last until 2016," Charles Johnston, a New York-based coal analyst at CreditSights Inc., said in a telephone interview. "They have a limited amount of time until they run out of cash."
Walter management made a huge mistake by not exchanging more of the unsecured debt for equity when the equity was trading at much higher prices.


jHurt said...

Stock at $2 seems really cheap, especially with ~2 yrs liquidity. When the world was ending in late 2008 the stock was less than $20, went to nearly $140 some 2 years later.

Anyone smarter than me care to opine on how to value these kinds of plays? I know it should be valued like an option...$140M market cap with $2.8B EV, I feel like the option value on these kinds of things are normally closer to 10% of the EV

CP said...

The unsecureds are trading below 30 and they are a donut too.

CP said...

But to answer your question, it's easy to value all of the different parts of the capital structure if you have a met coal price forecast.

CP said...

You could read up a bit on the company and on met coal.

Walter bought a competitor (with debt, not stock) at the absolute peak of the met coal cycle.

It may be the highest print that met coal will ever see, because it's highly unlikely that a supply destruction (AUS mine floods) and insane demand (Chinese buildings to nowhere) of that magnitude would ever occur simultaneously again.