Cloud Peak Energy Inc. opted to not pay a $1.8 million interest payment due March 15, triggering a 30-day grace period to make the payment before the company would default and accelerate the maturity of the debt.
The struggling Powder River Basin coal company said in a securities filing March 15 that it does not have adequate liquidity to repay the principal balance if the debt is accelerated. If Cloud Peak determines that it will not make the payment by April 14, it may file for a Chapter 11 bankruptcy.
"Our forecasted cash from operations alone is insufficient to fund cash interest and capital expenditures," Cloud Peak said in the filing. "This has resulted in our conclusion that there is substantial doubt about our ability to continue as a going concern. As a result, we will continue to pursue options to alleviate this condition, including but not limited to evaluating our restructuring options, but there can be no guarantees that this will alleviate the substantial doubt that exists."
Through its Cloud Peak Energy Resources LLC subsidiary, Cloud Peak has $290.4 million in outstanding indebtedness under 12.00% second lien senior notes due 2021 and $56.4 million in outstanding indebtedness under the 6.375% senior notes due 2024. Cloud Peak said it has sufficient liquidity to make the interest payment due on the 2024 notes but elected to use the 30-day grace period to assess restructuring alternatives. A $17.4 million payment on the 2021 notes is due May 1. A 30-day grace period is also built into that debt agreement.
An event of default on either of the notes would trigger a cross-default under the company's accounts receivable program and allow the lender to terminate the program. Cloud Peak and its related subsidiaries entered into a forbearance agreement with PNC Bank NA on March 14 that provides that the bank will not exercise remedies upon a default under the accounts receivable securitization program based on the existence of substantial doubt regarding the coal miner's ability to continue as a going concern.
The company noted that it has limited access to capital markets, a problem that has plagued the coal sector broadly in recent years. Cloud Peak also pointed to troubles from ongoing operational issues at its Antelope mine, depressed Powder River Basin thermal coal industry conditions, uneconomic export pricing in the fourth quarter of 2018 and other issues stressing the company's finances.
Cloud Peak disclosed in November 2018 that it engaged advisors to review strategic alternatives including a potential sale of the company. The process did not result in a transaction in the fourth quarter of 2018, the company noted in its March 15 securities filing.
"We are actively engaged in discussions with certain of our creditor groups' financial and legal advisors regarding potential alternatives, including asset sales, a private debt restructuring, or a court-supervised reorganization under Chapter 11 of the U.S. Bankruptcy Code, and related financing needs," Cloud Peak wrote. "Although this process remains uncertain and fluid, we will need to restructure our balance sheet in order to improve our capital structure, adjust our business to ongoing depressed [Powder River Basin] thermal coal industry conditions, address our significantly reduced liquidity and continue as a going concern."
The ongoing restructuring evaluation is expected to delay the company's 2019 annual stockholders meeting. Mining operations and reclamation activities are expected to continue in the ordinary course of business.
Cloud Peak reported a full-year net loss of $718.0 million, or $9.49 per share, in 2018.