Alpha Natural Resources (NYSE: ANR), the nation’s top metallurgical coal producer, has amended and restated its secured credit facility, increasing the total amount of the facility from $1.6bn to $1.725bn and further enhancing its financial flexibility.
The amended and restated credit agreement includes a new $625m covenant lite senior secured term loan B facility, which matures on May 22, 2020, Alpha said May 22. The proceeds of the term loan B facility will be used to repay the entire $525m aggregate principal amount of Alpha’s obligations under its existing term loan A facility, which matures on June 30, 2016, with the balance used to pay fees and expenses and for general corporate purposes.
The amended and restated credit agreement, among other revisions, provides for an increased senior secured revolving facility from $1bn to $1.1bn, which matures on June 30, 2016. Financial maintenance ratios applicable to the revolving facility have also been revised, including relaxation of the interest coverage ratio from 2.25 times to 1.50 times through 2013, from 2.50 times to 1.50 times during 2014 and from 2.50 times to 2.00 times from 2015 through the maturity date of the revolving facility. In addition, the leverage ratio covenant has been removed, while the senior secured leverage ratio of 2.50 times has been extended through the maturity date of the revolving facility.
Furthermore, the minimum liquidity requirement, which is applicable to the revolving facility through the end of 2014, has been reduced from $500m to $300m.
Simultaneously with its entry into the amended and restated credit agreement, Alpha said it terminated its accounts receivable securitization facility, which provided for the issuance of letters of credit in a maximum aggregate amount of $275m. Letters of credit outstanding under the facility as of May 22, 2013, in a total amount of about $160m, were transferred to the amended and restated credit agreement and are deemed to be issued thereunder. The termination of the receivables facility allowed Alpha to pledge its receivables to the secured parties under the amended and restated credit agreement.
“The amendment and restatement of our secured credit facility and the convertible senior notes transaction completed last week have extended the maturities of over $900 million of Alpha’s debt. We have relaxed the financial covenants under our secured credit facility for the remaining term of the facility, and we retain significant liquidity through cash, cash equivalents, marketable securities and the capacity available under our revolving credit facility,” said Alpha CFO Frank Wood. “These proactive transactions provide Alpha with continued financial flexibility as we manage through the current challenging markets for metallurgical and steam coals.”
With mining operations in Virginia, West Virginia, Kentucky, Pennsylvania and Wyoming, Alpha supplies metallurgical coal to the steel industry and thermal coal to generate power to customers on five continents. In June 2011, this Virginia-based company acquired dominant Central Appalachia producer Massey Energy.
In the first quarter of this year, Alpha’s sales of steam coal were 17.9 million tons, and accounted for approximately 78% of coal sales volume. In the first quarter of 2012, sales of steam coal were a more robust 23.2 million tons, and accounted for approximately 83% of coal sales volume. In the first quarter of this year, sales of met coal, which generally sells at a premium over steam coal, were 5.1 million tons, and accounted for around 22% of coal sales volume. In the year-ago quarter, sales of met coal were 4.9 million tons and accounted for approximately 17% of coal sales volume.
In a May 9 prospectus related to this refinancing, Alpha said: “The market price of our common stock has experienced, and may continue to experience, significant volatility. Between January 1, 2011 and May 6, 2013, the closing trading price of our common stock on the New York Stock Exchange has ranged from a low of $5.28 per share to a high of $68.05 per share. This volatility may affect the price at which you could sell the common stock, if any, you receive upon conversion of your notes. In addition, because the notes are potentially convertible based on the volume-weighted average price of our common stock, a decrease in the price of our common stock may depress the trading price of the notes.”