Peabody Energy Corp. launched a process to refinance its term loan and revolver to accommodate a recently announced joint venture with Arch Coal Inc., increase financial flexibility, extend debt maturities and increase pre-payable debt as it warned investors to expect third-quarter results materially lower than the second-quarter results.
Part of the net proceeds from the refinancing may be used to finance the company's pending tender offer for its outstanding 6.000% senior secured notes due 2022 and 6.375% senior secured notes due 2025. Peabody said it remains committed to its previously stated liquidity and gross debt targets.
Meanwhile, the company confirmed full-year guidance targets disclosed on July 31 but noted capital expenditures and seaborne coal volumes are likely to come in at the lower end of the company's targeted annual range while metallurgical coal costs are expected to be at the higher end of the annual range. Third-quarter results will likely be "materially lower than second-quarter performance," Peabody added.
The company experienced a highwall failure and fatality at its Middlemount joint venture mine in Queensland in late June. The incident is expected to reduce Peabody's share of earnings from the venture by about $30 million to $35 million compared to the second quarter.
Peabody also anticipates reduced pricing for seaborne metallurgical and thermal coal sales in the third quarter. Metallurgical coal volumes are expected to be modestly below second-quarter levels as lower demand is driving deferrals on both seaborne thermal and metallurgical coal shipments.
The company is projecting fourth-quarter seaborne volumes and costs to outpace the expected third-quarter performance.
