Why Walter Energy Inc. Shares Stumbled
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Walter Energy , a producer and exporter of metallurgical coal used in steelmaking, tumbled as much as 11% after a regulatory filing today showed the company is attempting to refinance some of its outstanding debt.
So what: Walter Energy is seeking permission from its lender to repay a $407 million loan, and to refinance that loan with looser restrictions. Bloomberg reported that Walter Energy needs this concession since, under the current terms with its lender, it must also make repayments on a $978 million term loan B. If Walter Energy's lender complies with its requests, it would ease some of the coal company's' near-term obligations and give it more time to cut costs and wait for coal prices to stabilize and demand to improve.
Now what: I'm part of the dissenting group that believes coal could still be a viable investment. While it has been replaced by natural gas in some electric utilities, coal accounted for 37% of all electric generation in 2012, according to the Energy Information Administration. Between rapid industrialization in China and India and a stabilizing U.S. economy, coal should be nearing its trough. Walter Energy, though, will need to dig deep to reduce costs if it hopes to survive this steep sector-wide downturn and thrive once things turn around.
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The article Why Walter Energy Inc. Shares Stumbled originally appeared on Fool.com.Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool has no position in any companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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