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Cloud Peak Energy's borrowing capacity is reduced in credit facility extension

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Cloud Peak Energy's borrowing capacity is reduced in credit facility extension

Cloud Peak Energy Inc. significantly reduced its maximum borrowing capacity with its lenders but extended a 2019 maturity date of its credit facility by three years.

Through an agreement with its wholly owned Cloud Peak Energy Resources LLC subsidiary, the pure-play Powder River Basin coal company now can borrow up to $150 million, down from its previous maximum borrowing capacity of $400 million, the company wrote in a May 24 securities filing. The agreement extends the credit facility from Feb. 21, 2019, to May 24, 2021, while tightening certain quarterly financial covenants including its ratios of gross debt to EBITDA, EBITDA to fixed charges and funded debt to EBITDA.

Cloud Peak is now required to only maintain minimum liquidity of $100 million by the end of each quarter, compared to the original agreement that required liquidity of $125 million at the end of each month. The company noted that if the amended credit agreement were in effect as of March 31, the subsidiary would have had total available liquidity of $278 million.

The company is the largest U.S. coal miner by production to avoid a recent wave of bankruptcy reorganizations that swept the sector. While it has enjoyed some support from a recent uptick in export markets, the company has indicated that utilities in the U.S. remain hesitant to engage in the sort of buying activity that would offer a boost to persistently weak pricing.

CFO Heath Hill indicated on an April 26 earnings call that Cloud Peak was working to amend the agreement and expected borrowing capacity to be lower, though the company's focus "is on ensuring that we have adequate liquidity to support our business needs."

The subsidiary also entered into an agreement extending the term of its accounts receivable securitization program from Jan. 23, 2020, to May 24, 2021. The extension did not change the maximum $70 million size of the program.

The credit agreement is through PNC Bank NA, which is the administrative agent, and a syndicate of lenders.