Boston, MA 04/16/2014 (wallstreetpr) – The future continues to look bleak for the leading supplier of metallurgical coal, Alpha Natural Resources, Inc. (NYSE:ANR), after a plunge in coal in prices caused a stream of its small competitors to file for bankruptcy. Bondholders in the company ought to be worried as the company continues to consume more cash than ever.
Bonds Dropping in Value
Alpha’s bonds have lost nearly 9.09% this year alone, which is the biggest, lost among other industry peers. The biggest challenge, on the other hand, lays on the fact that USD High Yield Corporate Index investors demand up to 9.67% points than other comparable treasuries to hold the company’s $800 million notes that are due in 2019.
Alpha Natural Resources, Inc. (NYSE:ANR) has failed to turn to profits at the back of spending $7.1 billion on Massey Energy that marked the industry most expensive takeover. Chinese demand for coal continues to slow down, greatly affecting the company’s sales avenue with the situation being made worse by Australian rivals who have increased their supplies.
Alpha to Face increased Cash Burn
A 66% drop in coal prices has already sent James River Co into bankruptcy with analysts projecting the impact could be severe on Alpha Natural Resources in terms of cash burn. Analyst’s estimates that the metallurgical coal supplier could be forced to burn up to $216.8 million in cash, amidst harsh coal markets.
Analysts expect Alpha to lose more money this year denting a major blow to the company’s ability to reduce its debt that stands at $3.43 billion. Since Alpha Natural Resources shares hit record highs of $67.38 after announcing the acquisition of Massey, they have consequently dropped to a low of $4.46 representing a 96% drop. Alpha Natural Resources’ is thought to have overpaid for the acquisition deal that significantly affected its cash balance.
The stock of Alpha Natural Resources, Inc. (NYSE:ANR) look set to fall even further as demand in China continue to dwindle as coal prices tumble to lows of $113 a ton.
