NEW YORK Moodys Investors Service Inc. expects U.S. coal producers to cut production, sell assets and restructure debt to improve their liquidity in the near term.
Business conditions for U.S. coal producers will remain depressed throughout next year, it said in an Aug. 8 report, noting that companies with the strongest liquidity will be best positioned to deal with an extended period of weakness.
"We expect producers to continue to take actions to improve their liquidity in the near term," Moodys assistant vice president Ben Nelson said, "including additional production curtailments to limit cash burn, asset sales and capital market activities to add liquidity and in some cases additional debt restructuring to align balance sheets for what we expect will be a protracted cyclical trough."
Peabody Energy Corp. has the strongest liquidity, with more than $500 million in cash and $1.4 billion available under its revolving credit facility, according to Moodys.
"Consol Energy (Inc.), which has not yet had the payoff it seeks from shale development, has a $2-billion revolving credit facility and can sell assets if necessary," Moodys vice president and senior analyst Anna Zubets-Anderson said. "Although Alpha Natural Resources (Inc.) and Arch Coal (Inc.) both face falling earnings and escalating leverage, each holds roughly $1 billion in cash and marketable securities. Alpha and Arch can weather an extended downturn more easily than others."
Analysts told AMM sister publication Steel First in February that they expect to see more mine idlings, sell-offs and closures in 2013 due to scant demand, squeezed metallurgical coal profit margins and uncertainty in the global economy.
A version of this article was first published by AMM sister publication Steel First.