Foresight Energy LP (NYSE:FELP) is nearing the end of a 30-day “grace period” to make an interest payment of roughly $23.6m to a group of creditors, the company indicated in a financial report to the Securities and Exchange Commission (SEC) on March 15.
“On February 16, 2016, we did not pay the accrued interest owed to holders of the 2021 Senior Notes on such day and elected to exercise the 30- day grace period with respect to the interest payment due under the Indenture,” Foresight said in its annual 10-K report to the SEC.
The aggregate amount of the interest payment due is $23.6m. “If we do not make the interest payment by the end of the 30-day grace period, an additional event of default will exist under the Indenture. In addition, an event of default will exist under the Credit Agreement, Foresight Receivables LLC’s securitization agreement and the credit agreements governing certain equipment financings of certain of our other subsidiaries,” the company said.
“Our auditor’s opinion in connection with our 2015 financial statements includes an explanatory paragraph regarding the uncertainty of the Partnership’s ability to continue as a “going concern” which will result in an additional default under the terms of the Credit Agreement as well as the 2021 Senior Notes, Foresight Receivables LLC’s securitization agreement and the credit agreements governing certain equipment financings of certain of our other subsidiaries, because these agreements require delivery of financial statements without a going concern explanatory paragraph in the auditor opinion.”
Foresight goes on to say it is “actively negotiating an out-of-court restructuring with certain holders of the 2021 Senior Notes (the “Consenting Noteholders”), who collectively beneficially own or manage in excess of 75% of the aggregate principal amount of the 2021 Senior Notes, and our other creditors. There can be no assurance that these efforts will result in any agreement.”
“If an agreement on the terms of an out-of-court restructuring is not reached, it may be necessary for us to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring, or our creditors could force us into an involuntary bankruptcy or liquidation,” Foresight said.
“Given the difficult coal market conditions expected for 2016, we believe that there is a reasonable possibility that we may not be able to comply with our financial covenants during 2016,” Foresight said.
Such a failure would further complicate things for Foresight Energy. Foresight could then be forced to seek more amendments or wavers from creditors. “We may not be able to do so on favorable terms, if at all.”
The company goes on to say:
“If we were unable to obtain any required amendments or waivers, our lenders would have the right to exercise remedies specified in the loan agreements, including accelerating the repayment of debt obligations and taking collection action against us.”
“If such acceleration occurred, we currently have insufficient cash to pay the amounts owed and would be forced to seek alternative financing. However, we may not be able to obtain such financing on favorable terms, if at all.”
Foresight Energy LP is a leading producer and marketer of thermal coal controlling over 3 billion tons of coal reserves in the Illinois Basin. Foresight currently owns four mining complexes (Williamson, Sugar Camp, Hillsboro and Macoupin), with four longwall systems, and the Sitran river terminal on the Ohio River.
Foresight’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.